SAAB — Earnings Release 2019

Oct 22, 2019

JANUARY-SEPTEMBER 2019

Sales BSEK

24.9

Organic sales growth %

Operating margin

11

%

Comment by the President and CEO, Håkan Buskhe:

Strong orders, organic growth and continued margin improvement

During the first nine months of 2019, Saab reported a strong order intake and an organic growth of 11 per cent. The development is in line with Saab's goals: continued sales growth and improved margins. The focus has continued to be on the implementation of Saab's major programmes. Executing them according to plan is the basis of Saab's development, together with further investments in technology and internationalization.

Orders

Order bookings amounted to SEK 19,093 million (17,183) in the first nine months. Several orders contributed positively to the quarter, primarily the order from Finland's Ministry of Defence to provide and integrate combat system for Finland's new corvettes as part of the Squadron 2020 programme. This is a major milestone for Saab as it means a reference customer in advanced combat systems, integration and sensors. Further, it is of strategic importance for Saab when other countries procure this type of advanced systems.

Small orders continued to grow compared to the third quarter of 2018. Increasing the number of small and medium-sized orders has been a goal for Saab. Market demand remains strong and going forward Saab sees good business opportunities.

Sales and operating income

Sales in the first three quarters amounted to SEK 24,855 million (22,138), corresponding to an organic growth of 11 per cent. The increase is mainly driven by business areas Dynamics but also from strong development in other business areas.

Operating income amounted to SEK 1,739 million (1,142) with an operating margin of 7.0 per cent (5.2). Saab has continued to strongly focus on implementation and delivery of key milestone projects, while at the same time, it is important to efficiently develop the smaller sized and recurring businesses.

Efforts to improve efficiency and increase productivity are continuing and the measures taken are reflected in the period's stronger operating margin compared to the third quarter of 2018. The work to adapt the product portfolio is also making progress. Digitalization and automation of operations are continuing and during the quarter several steps were taken to more efficiently manage markets and sales, such as the appointment of Chief Marketing Officer, who will become a member of the Group Management.

Operational cash flow

Operational cash flow amounted to SEK -4,356 million (-5,197) and is in line with the development previously communicated for 2019. The negative cash flow can mainly be attributed to the high level of completion of Saab's major contracts, mainly in Aeronautics. Saab maintains its view that operational cash flow will be at a better level for the full-year 2019 than 2018, as large milestone payments are scheduled in the fourth quarter.

CEO change

During the third quarter, Håkan Buskhe announced that he is stepping down as President and CEO of Saab. The Board appointed Micael Johansson as his successor, he takes over on October 23.

OUTLOOK STATEMENT FOR 2019:

We estimate that sales growth in 2019 will be in line with Saab's long-term financial goal: annual organic sales growth of 5 per cent.

The operating margin in 2019, excluding material non-recurring items, is expected to improve compared to 2018, bringing Saab a step closer to its long-term financial goal: an operating margin of 10 per cent per year over a business cycle.

Financial highlights
MSEK	Jan-Sep 2019	Jan-Sep 2018	Change, %	Q3 2019	Q3 2018	Full Year 2018
Order bookings	19,093	17,183	11	9,383	4,519	27,975
Order backlog	96,004	102,400	-6			102,184
Sales	24,855	22,138	12	7,914	6,419	33,156
Gross income	5,466	4,976	10	1,678	1,439	7,764
Gross margin, %	22.0	22.5		21.2	22.4	23.4
EBITDA ³⁾	2,742	1,528	79	849	205	3,182
EBITDA margin, %	11.0	6.9		10.7	3.2	9.6
Operating income (EBIT)	1,739	844	106	518	-61	2,266
Operating margin, %	7.0	3.8		6.5	-1.0	6.8
Adjusted operating income	1,739	1,142	52	518	237	2,564
Adjusted operating margin, %	7.0	5.2		6.5	3.7	7.7
Net income	1,121	358	213	295	-92	1,366
of which Parent Company's shareholders' interest	1,100	331	232	269	-94	1,313
Earnings per share after dilution, SEK ¹⁾	8.21	2.84		2.01	-0.81	11.21
Return on equity, % ²⁾	13.1	7.1				8.1
Operational cash flow	-4,356	-5,197		-1,654	-2,447	-2,424
Free cash flow	-4,991	-5,699		-1,865	-2,507	-3,195
Free cash flow per share after dilution, SEK	-37.25	-48.91		-13.95	-21.52	-27.27
¹⁾ Average number of shares after dilution	133,994,725	116,515,174		133,702,351	116,499,013	117,144,915
²⁾ Return on equity is measured over a rolling 12-month period.

³⁾ EBITDA for the first nine months 2019 is effected by the implementation of IFRS 16 with additional depreciations of MSEK 293. For more information, see note 16.

As of 1 January 2019, the Group applies IFRS 16 Leases, which means that some performance indicators for the Group – EBITDA, EBIT, Equity/assets ratio, Free cash flow, Operational cash flow, Net debt and Return on capital employed – have been affected in the first nine months of 2019. The corresponding performance indicators for comparative periods have not been restated. See also note 16 for a summary of the effects of the implementation of IFRS 16.

The Group's operating segments recognise all lease contracts as operating leases.

The average number of shares outstanding for previous periods, which is reported for comparison purposes, has been adjusted in accordance with IAS 33 Earnings per share, in accordance with the terms of the rights issue implemented in the fourth quarter of 2018.

Orders

Third quarter 2019

Order bookings amounted to SEK 9,383 million (4,519) in the third quarter of 2019. Bookings of small orders grew strongly, up 32 per cent compared to 2018. During the quarter, Saab received a large order for the combat system and system integration for the Finnish Navy's new corvettes as part of the Squadron 2020 programme worth SEK 4.2 billion.

January-September 2019

Order bookings amounted to SEK 19,093 million (17,183) in the first nine months of 2019. Bookings of small orders grew strongly, up 19 per cent compared to 2018 to SEK 9,205 million (7,766).

In the first nine months of 2019, index and price changes had a positive effect on order bookings of SEK 474 million, compared to SEK 269 million in the same period in 2018.

The order backlog at the end of the period amounted to SEK 96,004 million, compared to SEK 102,184 million at the beginning of the year. In total, 69 per cent (65) of the order backlog is attributable to markets outside Sweden.

For more information on orders received, see the business area comments on pages 7, 8 and 9.

Sales

Third quarter 2019

Sales in the third quarter amounted to SEK 7,914 million (6,419). The business area Support and Services had a strong sales increase. The business areas Surveillance and Aeronautics also strengthened their sales due to a high level of activity.

January-September 2019

Sales in the first nine months amounted to SEK 24,855 million (22,138), corresponding to an organic sales growth of 11 per cent. The increase is mainly due to a higher level of deliveries within the business area Dynamics and higher activity level within the business areas Aeronautics, Industrial Products and Services, and Support and Services.

Sales from markets outside Sweden amounted to SEK 15,592 million (12,840), corresponding to 63 per cent (58) of total sales. 85 per cent (84) of sales was related to the defence market.

Sales growth

Per cent	Jan-Sep 2019	Jan-Sep 2018	Q3 2019	Q3 2018	Year 2018
Organic sales growth	11	2	21	2	4
Acquisitions	-	1	-	1	1
Currency effects regarding revaluation of foreign subsidiaries	1	-	2	1	-
Total sales growth	12	3	23	4	5

Sales per region

MSEK	Jan-Sep 2019	Jan-Sep 2018	Change, %
Sweden	9,263	9,298	-
Rest of Europe	3,671	3,107	18
North America	2,648	2,007	32
Latin America	3,175	2,537	25
Asia	4,656	3,925	19
Africa	264	270	-2
Australia, etc.	1,178	994	19
Total	24,855	22,138	12

Classification of orders MSEK

Small orders	<100
Medium-sized orders	100-1000
Large orders	>1000

Order distribution Orders exceeding MSEK 100 accounted for 52% (55) of total orders during January-

September 2019.

Order backlog duration:

2019: SEK 9.2 billion 2020: SEK 26.6 billion 2021: SEK 20.4 billion 2022: SEK 15.5 billion After 2022: SEK 24.3 billion

Market

A total of 75% (67) of order bookings was related to markets outside Sweden during January-September 2019.

Sales MSEK

Income

Third quarter 2019

The gross margin in the third quarter was 21.2 per cent (22.4).

Operating income amounted to SEK 518 million (-61) with an operating margin of 6.5 per cent (-1.0). The operating margin improved due to a higher activity and delivery level within several business areas. Operating income for the third quarter of 2018 included SEK 298 million in non-recurring items related to efficiency improvements designed to increase productivity. For further information, see note 5. Adjusted for non-recurring items, operating income amounted to SEK 237 million and the operating margin was 3.7 per cent in the third quarter 2018.

January-September 2019

The gross margin in the first nine months of 2019 was 22.0 per cent (22.5).

Total depreciation, amortisation and write-downs amounted to SEK 1,003 million (684). Depreciation of tangible fixed assets amounted to SEK 807 million (445), of which SEK 293 million relates to additional depreciation as of 1 January 2019 in connection with the implementation of IFRS 16.

Internally funded R&D expenditures amounted to SEK 1,707 million (1,629), of which SEK 1,002 million (789) has been capitalised. Capitalised expenditures are mainly attributable to the development of Gripen E/F for future exports.

Amortisation and write-downs of intangible fixed assets amounted to SEK 196 million (239), of which amortisation and write-downs of capitalised development expenditures amounted to SEK 107 million (150). The share of income in associated companies and joint ventures amounted to SEK -74 million (-3).

Operating income amounted to SEK 1,739 million (844) with an operating margin of 7.0 per cent (3.8). The majority of the business areas achieved increases in their operating margins in the first nine months of 2019, partly because of higher sales and partly because contributions from efficiency improvements. The implementation of IFRS 16 positively affected operating income by SEK 35 million and the operating margin by 0.1 per cent in the first nine months of 2019.

Adjusted for non-recurring items, operating income in the same period 2018 amounted to SEK 1,142 million and the operating margin was 5.2 per cent. See note 5 for further information.

Financial net

MSEK	Jan-Sep 2019	Jan-Sep 2018
Financial net related to pensions	-69	-50
Net interest items	-57	-65
Currency gains/losses	-55	-205
Lease liability interest	-76	-13
Other financial items	-8	-39
Total	-265	-372
The financial net related to pensions is the financial cost for net pension obligations recognised in the balance sheet. See note 13 for more information regarding defined-benefit pension plans.
Net interest items refer to the return on liquid assets and short-term investments as well as interest expenses on short- and long-term interest-bearing liabilities and realised derivative results.
Currency gains/losses recognised in the financial net are mainly related to currency hedges of the tender portfolio, which are measured at fair value through profit and loss. In the first nine months of 2018, net income was negatively affected by changes in the market value of derivatives related to hedged tenders mainly in USD.
Interest expenses attributable to lease liabilities amounted to SEK -76 million, of which SEK -63 million is an effect of the transition to IFRS 16.
Other net financial items consist of unrealised results from the market valuation of short-term investments and derivatives as well as other currency effects, e.g. changes in exchange rates for liquid assets in currencies other than SEK. Derivatives are used to reduce interest rate risk in the investment portfolio, which consists of long-term interesting-bearing securities.
Tax
Current and deferred taxes amounted to SEK -353 million (-114), equivalent to an effective tax rate of 24 per cent (24).
Return on capital employed and equity
The pre-tax return on capital employed was 11.0 per cent (7.7) and the after-tax return on equity was 13.1 per cent (7.1), both measured over a rolling 12-month period.

Tax

Return on capital employed and equity

The pre-tax return on capital employed was 11.0 per cent (7.7) and the after-tax return on equity was

Adjusted operating margin, %

Jan-Sep 2016 Jan-Sep 2017 Jan-Sep 2018 Jan-Sep 2019

Earnings per share after dilution, SEK

Earnings per share have been adjusted in accordance with the rights issue completed in 2018.

Financial position and liquidity

At the end of September 2019, net debt was SEK 10,537 million, an increase of SEK 9,077 million compared to year-end 2018, when net debt amounted to SEK 1,460 million. The effects of changes in accounting principles related to IFRS 16 contributed to an increase of SEK 2,190 million.

Cash flow from operating activities amounted to SEK -2,651 million (-3,764).

In the first nine months of 2019, accounts receivable decreased in all business areas. This was due to several major deliveries being completed and invoiced in late 2018. In total, accounts receivable decreased by SEK 2,297 million from the beginning of the year.

Due to the level of completion of large projects, contract assets increased by SEK 3,098 million during the period at the same time that contract liabilities decreased by SEK 2,570 million.

Inventories increased by SEK 1,209 million during the period. The increase mainly relates to future deliveries within the business areas Surveillance and Dynamics.

Net provisions for pensions, excluding the special employer's contribution, amounted to SEK 5,289 million as of 30 September 2019, compared to SEK 4,099 million at year-end 2018. The change had a negative effect on net debt of SEK 1,190 million. The increase in provision is mainly because the discount rate used to calculate the pension obligation was reduced to 1.25 per cent from 2.25 per cent during the period, though the effect was partly offset by a concurrent reduction in the inflation assumption to 1.75 per cent from 2.00 per cent. For further information on Saab's defined-benefit pension plans, see note 13.

Tangible fixed assets amounted to SEK 6,070 million at the end of the period. Finance leases on aircraft and properties that had previously been classified as tangible fixed assets have been reclassified in connection with the transition to IFRS 16 as right-of-use assets in the balance sheet, affecting the opening balance for 2019 by SEK 441 million.

Right-of-use assets of SEK 2,500 million were added during the period as a result of the transition to IFRS 16.

During the first nine months, net investments amounted to approximately SEK 2,001 million (1,993).

Investments in tangible fixed assets amounted to SEK 890 million (1,079).

Investments in intangible fixed assets amounted to SEK 1,141 million (920), of which SEK 1,002 million (789) related to capitalised R&D expenditures. Capitalised R&D expenditures in the balance sheet increased by SEK 899 million. The increase is mainly related to investments to develop Gripen E/F for future exports. Of the total investments in intangible fixed assets, SEK 139 million (131) related to other intangible fixed assets.

As of 30 September 2019, short-term investments and liquid assets amounted to SEK 5,358 million, a decrease of SEK 6,096 million compared to year-end 2018.

Capital employed increased by SEK 2,717 million during the period to SEK 35,720 million. In addition to the effects of changes in accounting principles related to IFRS 16, the increase in capital employed is mainly related to the level of completion within the Gripen programmes.

Key indicators of financial position and liquidity

MSEK	30 Sep 2019	31 Dec 2018	Change	30 Sep 2018
Net liquidity / debt ²⁾	-10,537	#REF! -1,460	-9,077	-9,250
Intangible fixed assets	10,164	9,057	1,107	8,650
Goodwill	5,420	5,310	110	5,271
Capitalised development costs	4,227	3,328	899	3,011
Other intangible fixed assets	517	419	98	368
Tangible fixed assets, etc ³⁾	6,422	6,478	-56	6,291
Right of use assets ⁴⁾	2,500	-	-	-
Inventories	10,485	9,276	1,209	9,530
Accounts receivable	2,902	5,199	-2,297	3,790
Contract assets	13,564	10,466	3,098	10,141
Contract liabilities	6,320	8,890	-2,570	7,461
Equity/assets ratio, %	33.6	35.0		29.0
Return on equity, %	13.1	8.1		7.1
Equity per share, SEK ¹⁾	142.99	145.43	-2.44	114.05
1) Number of shares excluding treasury shares	132,824,280	133,482,880		115,524,571

2) The Group's net liquidity/debt refers to liquid assets, short-term investments and interest-bearing receivables less interest-bearing liabilities and provisions for pensions excluding provisions for pensions attributable to special employers' contribution. For a detailed break-down of interest-bearing receivables and interest-bearing liabilities, see note 8.

3) Including tangible fixed assets and biological assets.

4) Relate to right-of-use assets for leases according to IFRS 16 Leases.

Change in net debt Jan-Sep 2019

	MSEK
Net liquidity (+) / net debt (-), 31 Dec 2018	-1,460
Effects of change in accounting principles, IFRS 16 Leases,
opening balance 2019	-2,190
Cash flow from operating activities	-2,651
Change in net pension obligation	-1,190
Net investments	-2,001
Sale of and investments in financial assets	-41
Rights issue	11
Repurchase of shares	-301
Dividend	-601
Dividend to and transactions with non-controlling interest	-13
Additional lease liabilites	-134
Currency impact and unrealised results from financial investments	34
Net liquidity (+) / net debt (-), 30 Sep 2019 ¹⁾	-10,537
¹⁾ Net debt excluding net provisions for pensions, lease liabilities and interest-bearing
receivables, 30 Sep 2019	-3,297

Cash flow

Cash flow from operating activities excluding taxes and other financial items amounted to SEK -2,355 million (-3,204); see note 11.

Saab has an established programme to sell trade receivables in order to increase financial flexibility. As of 30 September 2019, receivables with a value of SEK 916 million (0) had been sold.

Operational cash flow amounted to SEK -4,356 million (-5,197). It is defined as cash flow from operating activities and acquisitions and divestments of intangible and tangible fixed assets. Cash flow from operating activities excludes taxes and other financial items but includes amortisation of lease liabilities. Cash flow is negative mainly as a result of increased working capital in major projects within the business area Aeronautics and utilisation of previous advances and milestone payments.

Free cash flow amounted to SEK -4,991 million (-5,699). For more detailed information on cash flow, see note 11.

Cash flow can be very different between reporting periods as the timing of milestone payments in large projects in the order backlog vary greatly depending on when milestones are passed.

	Jan-Sept 2019	Jan-Sept 2018
Cash flow from operating activities before changes in working capital, excluding taxes and other financial items ¹⁾	2,969	2,166
Change in working capital	-5,324	-5,370
Cash flow from operating activities excluding taxes and other financial items	-2,355	-3,204
Cash flow from investing activities ²⁾	-2,001	-1,993
Operational cash flow	-4,356	-5,197
Taxes and other financial items	-594	-560
Sales and acquisitions	-41	58
Free cash flow	-4,991	-5,699

1) Including amortisation of lease liabilities

2) Cash flow from investing activities excluding change in short-term investments and other interest-bearing financial assets and excluding sale of and investment in financial assets, investments in operations and sale of subsidiaries. If investments in and sale of financial fixed assets are considered to be of operating nature, the item is included in investing activities.

Free cash flow, MSEK

Operating segments

For more information about the operating segments, see note 3.

The Group's operating segments recognise all lease contracts as operating leases.

Page

7

Business Area Aeronautics

Aeronautics is a world-leading manufacturer of innovative air systems and is engaged in development of military aviation technology.

Business Area Dynamics

Dynamics offers a market-leading product portfolio comprising ground combat weapons, missile systems, torpedoes, unmanned underwater vehicles, training systems and signature management systems for armed forces around the world.

Business Area Surveillance

Surveillance's product portfolio includes airborne, ground-based and naval radar systems, self-protection systems, electronic warfare systems, combat systems and C4I solutions.

Business Area Support and Services

Support and Services offers reliable, cost-efficient service and support for all of Saab's markets. This primarily includes support solutions, technical maintenance and logistics as well as products, solutions and services for military and civil missions.

8

Business Area Industrial Products and Services

The business units within Industrial Products and Services are focused on mainly civilian customers. The business units Aerostructures, Avionics, Traffic Management, and the wholly owned, independent subsidiary Combitech are included in the business area.

Business Area Kockums

Kockums' portfolio includes submarine systems with the Stirling system for air-independent propulsion, surface combatants, mine hunting systems and autonomous vessels.

Business Area Aeronautics

Business units

Gripen E/F, Gripen C/D, Gripen Brazil, Advanced Pilot Training Systems, and Operations Contracts.

MSEK	Jan-Sep 2019	Jan-Sep 2018	Change, %	Q3 2019	Q3 2018	Full Year 2018
Order bookings	1,201	2,680	-55	317	532	5,261
Order backlog	42,670	47,433	-10			47,359
Sales	5,889	5,402	9	1,794	1,489	8,056
EBITDA	530	413	28	138	128	736
EBITDA margin, %	9.0	7.6		7.7	8.6	9.1
Operating income (EBIT)	485	371	31	122	113	680
Operating margin, %	8.2	6.9		6.8	7.6	8.4
Operational cash flow	-3,697	-2,617		-1,257	-654	-1,096
Defence/Civil (% of sales)	100/0	100/0		100/0	100/0	100/0
No. of FTE's	3,405	3,164	8			3,212

Sales, income and margin

Sales increased in the first three quarters through a continued high activity level within the Gripen programmes for Sweden and Brazil. The operating margin improved due to increased volume and productivity improvements as well as lower R&D expenditures for the T-X programme compared to the same period last year.

Cash flow

Operational cash flow was negative in the first three quarters primarily as a result of increased working capital attributable to the Gripen programmes.

Order

distribution Orders exceeding MSEK 100 accounted for 48% (75) of total orders during January-September 2019.

Market Sales in markets outside Sweden amounted to 51% (44) during January-September 2019.

Business Area Dynamics

Business units

Ground Combat, Missile Systems, Underwater Systems, Barracuda, and Training and Simulation.

MSEK	Jan-Sep 2019	Jan-Sep 2018	Change, %	Q3 2019	Q3 2018	Full Year 2018
Order bookings	4,503	3,845	17	1,357	1,272	7,308
Order backlog	14,364	12,445	15			13,645
Sales	3,889	3,032	28	960	912	5,319
EBITDA	352	168	110	42	41	610
EBITDA margin, %	9.1	5.5		4.4	4.5	11.5
Operating income (EBIT)	297	113	163	24	23	535
Operating margin, %	7.6	3.7		2.5	2.5	10.1
Operational cash flow	-111	-574		-172	-184	-120
Defence/Civil (% of sales)	94/6	92/8		93/7	91/9	93/7
No. of FTE's	2,316	2,219	4			2,252

Order

distribution Orders exceeding MSEK 100 accounted for 50% (61) of total orders during January-September 2019.

Market

Sales in markets outside Sweden amounted to 76% (68) during January-September 2019.

Orders

In the third quarter, Dynamics saw order bookings increase mainly from an order for a training system for the Belgian Army and a major order for ammunition order to the Carl-Gustaf system.

Sales, income and margin

Sales increased in the third quarter due to a high activity level and good deliveries compared to the same period in 2018. In addition, a non-recurring expense of SEK 6 million was incurred for productivity improvements in the third quarter of 2018.

Cash flow

Operational cash flow was negative during the third quarter due to continued growth in the business area and increased inventories ahead of upcoming deliveries.

Business Area Surveillance

Business units

Radar Solutions, Electronic Warfare Systems, Combat Systems and C4I Solutions, and Cyber Security.

MSEK	Jan-Sep 2019	Jan-Sep 2018	Change, %	Q3 2019	Q3 2018	Full Year 2018
Order bookings	7,639	5,406	41	5,443	1,364	7,370
Order backlog	17,150	15,081	14			14,731
Sales	5,395	5,095	6	1,876	1,518	7,397
EBITDA	714	462	55	264	108	904
EBITDA margin, %	13.2	9.1		14.1	7.1	12.2
Operating income (EBIT)	492	260	89	189	41	631
Operating margin, %	9.1	5.1		10.1	2.7	8.5
Operational cash flow	-72	-1,452		-294	-975	-1,085
Defence/Civil (% of sales)	99/1	99/1		100/0	99/1	99/1
No. of FTE's	3,792	3,768	1			3,770

Orders

In the third quarter, Surveillance significantly increased its order backlog primarily through the order from Finland, where Saab signed a contract for the combat system for the Finnish Navy's Squadron 2020 programme, but also orders for the Sea Giraffe radar system in the U.S. and maintenance for airborne surveillance systems.

Sales, income and margin

Sales increased in the first three quarters compared to the previous year. During the period, operating income improved in several areas thanks to an increased activity level and continued focus on costs. A non-recurring expense of SEK 42 million was incurred in the third quarter last year for productivity improvements.

Cash flow

Operational cash flow improved compared to the same period in 2018. The negative cash flow is explained by timing differences between order completion and future payment milestones.

Order

distribution Orders exceeding MSEK 100 accounted for 77% (72) of total orders during January-September 2019.

Market

Sales in markets outside Sweden amounted to 81% (77) during January-September 2019.

Business Area Support and Services

Business units

Aviation Services, Airborne ISR, Gripen Support and Communication and Tactical Solutions.

MSEK	Jan-Sep 2019	Jan-Sep 2018	Change, %	Q3 2019	Q3 2018	Full Year 2018
Order bookings	3,016	2,386	26	1,540	511	3,635
Order backlog	9,597	11,098	-14			10,690
Sales	4,167	3,813	9	1,526	1,077	5,470
EBITDA	495	429	15	163	87	754
EBITDA margin, %	11.9	11.3		10.7	8.1	13.8
Operating income (EBIT)	480	365	32	158	32	685
Operating margin, %	11.5	9.6		10.4	3.0	12.5
Operational cash flow	-654	142		-597	-54	369
Defence/Civil (% of sales)	86/14	83/17		88/12	82/18	84/16
No. of FTE's	1,898	1,864	2			1,851

Order

distribution Orders exceeding MSEK 100 accounted for 37% (21) of total orders during January-September 2019.

Market

Sales in markets outside Sweden amounted to 58% (57) during January-September 2019.

Orders

Order bookings were at a higher level compared to same period in 2018, which can be attributed in part to Support and Services' share of the Squadron 2020 contract to Finland. During the period, two support agreements were also signed for airborne surveillance systems.

Sales, income and margin

Sales, operating income and the operating margin have improved compared to the same period in 2018 due to a high activity level and efficiency improvements in all business units. A non-recurring expense of SEK 50 million was incurred in the third quarter of 2018 for productivity improvements related to an adjustment of the business area's product portfolio.

Cash flow

Operational cash flow was negative in the first three quarters. This can mainly be attributed to large contracts within airborne surveillance, where preparations are underway for upcoming deliveries, which has resulted in increased working capital.

Business Area Industrial Products and Services

Business units

Aerostructures, Avionics Systems, Traffic Management, and Combitech.

MSEK	Jan-Sep 2019	Jan-Sep 2018	Change, %	Q3 2019	Q3 2018	Full Year 2018
Order bookings	3,867	3,576	8	1,326	931	5,344
Order backlog	9,398	11,113	-15			11,004
Sales	4,623	4,228	9	1,377	1,278	6,107
EBITDA	197	128	54	15	4	290
EBITDA margin, %	4.3	3.0		1.1	0.3	4.7
Operating income (EBIT)	133	63	111	-7	-18	202
Operating margin, %	2.9	1.5		-0.5	-1.4	3.3
Operational cash flow	-264	-403		18	-259	-351
Defence/Civil (% of sales)	29/71	31/69		27/73	31/69	30/70
No. of FTE's	3,668	3,535	4			3,566

Order backlog

Order bookings have increased due to higher demand, mainly in the business units Avionics Systems and Traffic Management.

Sales, income and margin

Sales increased and measures to improve operating income have led to an increase in the operating margin compared to the same period in 2018, mainly driven by Aerostructures and Avionics Systems.

Cash flow

Operational cash flow was negative in the first three quarters due to increased working capital mainly within the business unit Traffic Management as well as currency-hedging transactions related to projects within the business unit Aerostructures.

Order backlog

Sales, income and margin

Order

distribution Orders exceeding MSEK 100 accounted for 9% (15) of total orders during January-September 2019.

Market

Sales in markets outside Sweden amounted to 56% (52) during January-September 2019.

Business Area Kockums

Business units

Submarines and Surface Ships.

MSEK	Jan-Sep 2019	Jan-Sep 2018	Change, %	Q3 2019	Q3 2018	Full Year 2018
Order bookings	923	748	23	379	218	1,123
Order backlog	5,386	7,300	-26			6,646
Sales	2,192	2,262	-3	690	637	3,291
EBITDA	79	150	-47	29	51	203
EBITDA margin, %	3.6	6.6		4.2	8.0	6.2
Operating income (EBIT)	52	128	-59	21	44	173
Operating margin, %	2.4	5.7		3.0	6.9	5.3
Operational cash flow	-222	92		-422	-331	251
Defence/Civil (% of sales)	100/0	100/0		100/0	100/0	100/0
No. of FTE's	1,195	1,196	-			1,205

Order

distribution Orders exceeding MSEK 100 accounted for 19% (16) of total orders during January-September 2019.

Market

Sales in markets outside Sweden amounted to 6% (9) during January-September 2019.

In the first three quarters, the activity level within both the submarine and surface ship businesses was high. Measures taken to improve operating income have led to improvements compared to the previous quarter. Cash flow

Kockums' share of the contract for Squadron 2020 to Finland had a positive impact on order bookings.

Operational cash flow was negative in the first three quarters due to a higher level of order completion and lower level of incoming payments.

Corporate

Corporate comprises Group staff, Group departments and other operations outside the core operations. Since 1 January 2018, Saab's minority portfolio is also reported in Corporate. The minority portfolio contains Saab's interests in Vricon Inc, UMS Skeldar AG and Ventures.

Corporate reported operating income of SEK -200 million (-456) in the period. Excluding non-recurring items of SEK 200 million in the third quarter of 2018, operating income amounted to SEK -256 million.

Operational cash flow attributable to Corporate amounted to SEK 664 million (-385) in the period. Sales of trade receivables had a positive effect of SEK 916 million. For more information, see the description of cash flow on page 5.

Acquisitions and divestments 2019

No significant acquisitions or divestments were made in the first nine months of 2019.

Share repurchase

Saab held 3,021,567 treasury shares as of 30 September 2019, compared to 2,363,299 at year-end 2018. The Annual General Meeting in 2019 authorised the Board of Directors to repurchase a maximum of 1,465,000 Series B shares to secure delivery of shares to participants in Saab's incentive programme and for subsequent transfers on the stock exchange to cover certain costs associated with LTI 2020, mainly social security costs. The Annual General Meeting also decided to authorise the Board, before the next Annual General Meeting, to decide on the acquisition of Series B shares up to a maximum of 10 percent of the total number of shares in the company. The purpose of the authorisation is to be able to adjust the company's capital structure and thereby contribute to increased shareholder value as well as to enable continued use of repurchased shares in connection with potential acquisitions of companies and for the company's share-related incentive programmes. In the second and third quarters of 2019, Series B shares were repurchased for SEK 301 million.

Risks and uncertainties

Saab's operations primarily involve the development, production and supply of technologically advanced hardware and software to military and civilian customers around the world. Operations largely consist of major projects carried out over long periods of time, usually several years, in close cooperation with customers, suppliers, partners and institutions.

Projects generally entail significant investments, long periods of time and technological development or refinement of products. In addition to customer and supplier relations, international operations involve joint ventures and collaborations with other industries as well as the establishment of operations abroad.

Operations entail risk in various respects. The key risk areas are strategic, market and political, operating, financial and compliance. Various policies and instructions govern the management of material risks. Saab today conducts more projects involving large share of development than before, and their inherent complexity entails a higher level of risk.

The market is characterised by challenging conditions where orders can be deferred to the future partly for financial and political reasons.

For a general description of the risk areas, see the annual report 2018, pages 48-51.

Owners

Saab's largest shareholders as of 30 September 2019

	% of capital	% of votes
Investor AB	30.2	40.5
Knut and Alice Wallenberg
Foundation	8.8	7.8
Första AP-fonden	6.4	5.6
Swedbank Robur
funds	4.5	4.0
AFA Insurance	3.1	2.7
Vanguard	2.0	1.7
Nordea funds	1.5	1.3
Unionen	1.0	0.9
Gladiator	1.0	0.9
Fidelity	1.0	0.8

Source: Modular Finance

The percentage of votes is calculated on the number of shares excluding treasury shares.

Personnel

	30 Sep 2019	31 Dec 2018
Number of
employees	17,334	17,096
FTE's	17,255	16,759

FTE's includes part-time employees.

Other events in January-September 2019 in brief

• On 3 January 2019, Saab completed a successful first flight with the second GlobalEye Airborne Early Warning & Control (AEW&C).
• Supported by Sweden, Saab in January submitted a proposal for the Finnish HX fighter procurement to the Finnish defence procurement agency, the Logistics Command of the Finnish Defence Forces. The proposal comprises 64 Gripen aircraft, both single-seat Gripen E and dualseat Gripen F, and is the formal response to the Request for Quotation (RFQ) issued in April 2018.
• Saab's Annual General Meeting in Linköping on 11 April decided on a dividend of SEK 4.50 per share to the shareholders with Monday, 15 April 2019 as the record date. Payment was made by Euroclear Sweden AB on Thursday, 18 April 2019.
• In May, Saab announced a new U.S. production site for its parts of the T-X jet trainer in West Lafayette, Indiana. Saab intends to invest USD 37 million in the facility from 2020.
• In June, the Swiss defence procurement agency, armasuisse, recommended that Saab not participate with Gripen E in their planned fighter evaluation process in Switzerland. Therefore, Saab decided not to attend the Swiss flight tests planned in June.
• In June, Saab's Board of Directors decided to repurchase the company's own shares. The decision was based on an authorisation from Saab's Annual General Meeting 2019. The purpose of the share repurchase is to secure delivery of shares to participants in Saab's long-term Share Matching Plan, Performance Share Plan and Special Projects Incentive.
• In June, the HMS Uppland was re-launched after comprehensive mid-life upgrades (MLU) in Karlskrona. As a result, two Gotland-class submarines have concluded MLU and are equipped to face the challenges of tomorrow.
• In June, Saab signed a framework agreement with FMV to provide the Swedish Armed Forces with the Carl-Gustaf M4 weapon system. The framework agreement will allow FMV to place orders for the system over a ten-year period.
• In June, Saab signed a multi-year framework agreement with the U.S. government, which allows the U.S. Marines and U.S. Special Forces to place orders for the AT4 disposable weapon system and ammunition to the Carl-Gustaf M4 recoilless rifle for up to USD 445 million (approximately SEK 4.2 billion) during a five-year period.
• On July 19, the governments of Sweden and the United Kingdom signed a Memorandum of Understanding (MoU) regarding cooperation on the development of a future combat air system. Saab views the agreement as a starting point for a long-term collaboration to promote development of existing platforms, including Gripen.
• On August 11, Saab announced that President and CEO Håkan Buskhe is stepping down from his position.
• In August, Saab announced that it had received an order from the Australian Army to extend the support of their Ground Based Air Defence (GBAD) and Counter Rocket, Artillery and Mortar (C-RAM) systems until 2020.
• On August 26, Saab announced that it had successfully completed the first flight with the Brazilian Gripen E.
• In August, Saab announced that it had appointed Dean Rosenfield as Chief Marketing Officer.
• In September, Saab appointed Merton Kaplan as the new Head of Investor Relations.
• On September 4, Saab's Board of Directors appointed Micael Johansson as the new President and CEO of Saab. Micael Johansson will take up his position on October 23, replacing outgoing CEO Håkan Buskhe.
• In September, Saab presented a new type of camouflage called ARCASe (Advanced Reversible Camouflage Screen emissive) at the DSEI in London.
• On September 10, Saab presented the first Gripen E to Brazil.
• In accordance with the resolution by Saab's Annual General Meeting 2019, the members of the Nomination Committee for 2020 were appointed based on the shareholder structure on 31 August 2019.
• In September, the Finnish government announced that it had selected Saab as a provider of the combat system for the Finnish Navy's Squadron 2020 programme. The contract is valued at EUR 412 million and covers the period 2019-2027.

For more information on significant order received during the period, see page 2 and the comments on the business areas on pages 7-9 and in note 3. All press releases can be found on http://saabgroup.com/Media/news-press/.

Events after the conclusion of the period

• Saab has appointed Petter Bedoire as Chief Technology Officer (CTO). Petter Bedoire will take up his position on 1 November 2019.
• Saab and Boeing have successfully completed a long-range test firing of the Ground-Launched Small Diameter Bomb (GLSDB) in Norway, according to an announcement on October 14.
• On October 21, Håkan Buskhe notified the Board that his assignment as member of the Board of Saab will end in conjunction with him resigning from his position as Saab President and CEO on October 22, 2019.

Framework agreement for AT4 and Carl-Gustaf ammunition

In June, Saab signed a multi-year framework agreement with the U.S. Government, which allows the U.S. Army, U.S. Marines and U.S. Special Forces to place orders for the AT4 disposable weapon system and ammunition to the Carl-Gustaf M4 recoilless rifle for up to USD 445 million (approximately SEK 4.2 billion) during a five-year period.

Finland selects Saab as a supplier for the Squadron 2020 programme

Government, which allows the U.S. Army, U.S. Marines and U.S. Special Forces to place orders for the AT4 disposable weapon system and ammunition to the Carl-Gustaf M4 recoilless rifle for up to USD 445 million (approximately SEK 4.2 billion) during a five-year period. In September Saab signed a contract with the Finnish Defence Forces Logistics Command, and received an order to deliver and integrate the combat system for the Finnish Navy's new corvettes within the Squadron 2020 programme. The order value is 412 million Euro.

About Saab

Saab serves the global market with world-leading products, services and solutions ranging from military defence to civil security. The company has operations and employees on all continents and constantly develops, adapts and improves new technology to meet customers' changing needs.

Short facts

Saab's Series B share is listed on Nasdaq Stockholm Large Cap Ticker: SAAB B.

• Saab has approximately 17,000 employees
• Local presence in approximately 35 countries
• Customers in more than 100 countries

Vision

It is a human right to feel safe.

Mission

To make people safe by pushing intellectual and technological boundaries. Business concept

Saab constantly develops, adapts and improves new technology to meet changing customer needs. Saab serves the global market of governments, authorities and corporations with products, services and solutions for defence, aviation and civil security.

Organisation

Saab's operations are divided into six operating segments for control and reporting purposes: the business areas Aeronautics, Dynamics, Surveillance, Support and Services, Industrial Products and Services, and Kockums. In addition, Corporate comprises Group staff, Group departments and secondary operations.

To ensure a presence in key local markets, Saab also has five market areas: Europe, Middle East & Africa, North America, Latin America and Asia Pacific.

Revenue model

Saab's sales are primarily generated from long-term customer contracts, service assignments and the sale of goods. Sales, income and cash flow fluctuate over the course of the year depending on the nature of the project.

Long-term customer contracts relate to the development and manufacture of complex systems that stretch over several reporting periods. Long-term customer contracts are recognised in revenue as the project is completed, while cash flows depend on the timing of deliveries, advances and milestone payments during the contract period.

Service assignments consist of consulting and support services. Examples include education and ongoing maintenance associated with previous deliveries. Revenue from service assignments is normally recognised when the services are rendered.

The third part of the revenue model is the sale of products and spare parts that Saab manufactures and stocks or purchases on behalf of customers. This revenue is recognised when ownership has been transferred to the buyer.

Financial goals

Sales

Average organic sales growth of 5 per cent per year over a business cycle.

Operating margin

Average operating margin (EBIT) of at least 10 per cent per year over a business cycle.

Equity/assets ratio

The equity/assets ratio will exceed 30 per cent.

Dividend

The long-term dividend goal is to distribute 20– 40 per cent of net income to the shareholders over a business cycle.

Saab's strategy

To stay a step ahead in an optimal way and meet our customers' needs, we have based our strategy on three priorities: market, efficiency and innovation. The aim is to create long-term value by working to achieve them. Sustainability issues affect our entire business, and engaged employees are the key to success.

Saab will also maintain a solid balance sheet, focus on capital efficiency and generate strong cash flow.

Market

We focus on areas where we have a strong market position and on strengthening our position in areas with good growth opportunities.

Our global presence and diversity will be strengthened in part through partnerships and local collaborations. We have zero tolerance for corruption and work actively to create a thoroughly transparent defence market.

Efficiency

The focus is on making functional processes more efficient, developing an even more business-oriented culture and developing leaders and employees.

Innovation

We concentrate our product portfolio on innovations in five core areas and feel that diversity and engaged employees drive innovation. The five core areas are: aeronautics, advanced weapon systems, command and control systems, sensors and underwater systems.

Consolidated income statement

MSEK	Note	Jan-Sep 2019	Jan-Sep 2018	Rolling 12 Months	Full Year 2018
Sales	4	24,855	22,138	35,873	33,156
Cost of goods sold		-19,389	-17,162	-27,619	-25,392
Gross income		5,466	4,976	8,254	7,764
Gross margin, %		22.0	22.5	23.0	23.4
Other operating income		136	99	193	156
Marketing expenses		-1,867	-1,909	-2,602	-2,644
Administrative expenses		-1,103	-1,088	-1,481	-1,466
Research and development costs		-812	-990	-1,089	-1,267
Other operating expenses		-7	-241	-29	-263
Share in income of associated companies and joint ventures		-74	-3	-85	-14
Operating income (EBIT) ¹⁾	3	1,739	844	3,161	2,266
Operating margin, %		7.0	3.8	8.8	6.8
Financial income		155	80	268	193
Financial expenses		-420	-452	-631	-663
Net financial items		-265	-372	-363	-470
Income before taxes		1,474	472	2,798	1,796
Taxes		-353	-114	-669	-430
Net income for the period		1,121	358	2,129	1,366
of which Parent Company's shareholders' interest		1,100	331	2,082	1,313
of which non-controlling interest		21	27	47	53
Earnings per share before dilution, SEK ²⁾		8.25	2.86	16.06	11.27
Earnings per share after dilution, SEK ³⁾		8.21	2.84	15.98	11.21
1) Of which depreciation/amortisation and write-downs		-1,003	-684	-1,235	-916
2) Average number of shares before dilution		133,368,706	115,767,742	129,668,545	116,467,822
3) Average number of shares after dilution		133,994,725	116,515,174	130,282,387	117,144,915

Consolidated statement of comprehensive income

MSEK	Jan-Sep 2019	Jan-Sep 2018	Rolling 12 Months	Full Year 2018
Net income for the period	1,121	358	2,129	1,366
Other comprehensive income/loss:
Items that will not be reversed in the income statement:
Revaluation of net pension obligations	-1,369	-969	-2,111	-1,711
Tax attributable to revaluation of net pension obligations	282	155	435	308
Total	-1,087	-814	-1,676	-1,403
Items that may be reversed in the income statement:
Translation differences	382	155	400	173
Cash flow hedges	-15	110	-272	-147
Tax attributable to cash flow hedges	2	-22	66	42
Total	369	243	194	68
Other comprehensive income/loss for the period	-718	-571	-1,482	-1,335
Net comprehensive income/loss for the period	403	-213	647	31
of which Parent Company's shareholders' interest	373	-223	585	-11
of which non-controlling interest	30	10	62	42

Consolidated statement of financial position

MSEK Note	30 Sep 2019	31 Dec 2018	30 Sep 2018
ASSETS
Fixed assets:
Intangible fixed assets	7 10,164	9,057	8,650
Tangible fixed assets	6,070	6,129	5,938
Biological assets	352	349	353
Right of use assets	2,500	-	-
Shares in associated companies and joint ventures	611	646	652
Financial investments	27	27	28
Long-term receivables 13	721	554	701
Deferred tax assets	590	382	268
Total fixed assets	21,035	17,144	16,590
Current assets:
Inventories	10,485	9,276	9,530
Derivatives	2,054	1,096	1,147
Tax receivables	256	67	470
Accounts receivable	2,902	5,199	3,790
Contract assets	13,564	10,466	10,141
Other receivables	599	507	463
Prepaid expenses and accrued income	1,074	919	743
Short-term investments	3,860	9,003	1,747
Liquid assets 11	1,498	2,451	1,450
Total current assets	36,292	38,984	29,481
TOTAL ASSETS	57,327	56,128	46,071
SHAREHOLDERS' EQUITY AND LIABILITIES
Shareholders' equity:
Parent Company's shareholders' interest	18,993	19,412	13,175
Non-controlling interest	246	221	184
Total shareholders' equity	19,239	19,633	13,359
Long-term liabilities:
Long-term lease liabilities	2,131	-	-
Other long-term interest-bearing liabilities	8 6,545	8,196	8,975
Other liabilities	178	190	200
Provisions for pensions 13	6,677	5,113	4,441
Other provisions	1,293	1,081	1,052
Deferred tax liabilities	29	16	160
Total long-term liabilities	16,853	14,596	14,828
Current liabilities:
Short-term lease liabilities	400	-	-
Other short-term interest-bearing liabilities	8 2,110	1,068	502
Contract liabilities	6,320	8,890	7,461
Accounts payable	2,738	4,077	2,527
Derivatives	2,713	1,234	1,091
Tax liabilities	206	147	176
Other liabilities	709	770	602
Accrued expenses and deferred income	5,380	5,097	4,889
Provisions	659	616	636
Total current liabilities	21,235	21,899	17,884
Total liabilities	38,088	36,495	32,712
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES	57,327	56,128	46,071

Consolidated statement of changes in equity

MSEK	Capital stock	Ongoing rights issue	Other capital contri butions	Net result of cash flow hedges	Translation reserve	Revaluation reserve	Retained earnings	Total parent company's shareholders' interest	Non controlling interest	Total shareholders' equity
Opening balance, 1 January 2018	1,746		543	-302	270	11	11,829	14,097	188	14,285
Effects of change in accounting principles, IFRS 9				14			-18	-4		-4
Adjusted opening balance, 1 January 2018	1,746		543	-288	270	11	11,811	14,093	188	14,281
Net comprehensive income/loss for the period January-September 2018				102	158		-483	-223	10	-213
Transactions with shareholders:
Repurchase of shares							-203	-203		-203
Share matching plan							104	104		104
Dividend							-588	-588	-13	-601
Acquisition and sale of non-controlling interest							-8	-8	-1	-9
Closing balance, 30 September 2018	1,746		543	-186	428	11	10,633	13,175	184	13,359
Net comprehensive income/loss for the
period October-December 2018				-200	19		393	212	32	244
Transactions with shareholders:
Rights issue		428	5,578					6,006		6,006
Issue costs			-22					-22		-22
Repurchase of shares							-	-		-
Share matching plan							39	39		39
Dividend							-	-	-	-
Acquisition and sale of non-controlling interest							2	2	5	7
Closing balance,
31 December 2018	1,746	428	6,099	-386	447	11	11,067	19,412	221	19,633
Opening balance, 1 January 2019	1,746	428	6,099	-386	447	11	11,067	19,412	221	19,633
Net comprehensive income/ loss for the period				-11	371		13	373	30	403
Transactions with shareholders:
Rights issue	428	-428
Repurchase of shares							-301	-301		-301
Share matching plan							123	123		123
Dividend							-601	-601	-	-601
Acquisition and sale of non-controlling interest							-13	-13	-5	-18
Closing balance, 30 September 2019	2,174	-	6,099	-397	818	11	10,288	18,993	246	19,239

Consolidated statement of cash flows

MSEK Note	Jan-Sep 2019	Jan-Sep 2018	Full Year 2018
Operating activities:
Income after financial items	1,474	472	1,796
Adjustments for items not affecting cash flows	1,569	1,603	1,808
Dividend from associated companies and joint ventures	19	37	39
Income tax paid	-389	-506	-479
Cash flow from operating activities before changes in working capital	2,673	1,606	3,164
Cash flow from changes in working capital:
Contract assets and liabilities	-5,585	-4,145	-3,039
Inventories	-1,134	-1,312	-1,057
Other current receivables	2,512	543	-1,044
Other current liabilities	-967	-134	1,965
Provisions	-150	-322	-479
Cash flow from operating activities	-2,651	-3,764	-490
Investing activities:
Investments in intangible fixed assets	-139	-131	-198
Capitalised development costs	-1,002	-789	-1,140
Investments in tangible fixed assets	-890	-1,079	-1,481
Sales and disposals of tangible fixed assets	30	6	23
Investments in and sale of short-term investments	5,173	2,712	-4,554
Investments in financial assets	-168	-46	-48
Sale of financial assets	35	61	62
Investments in operations 12	-	5	15
Sale of subsidiaries	-	3	33
Cash flow from investing activities	3,039	742	-7,288
Financing activities:
Repayments of loans	-201	-750	-967
Amortisation of lease liabilities	-298	-	-
Raising of loans	8	3,820	3,820
Rights issue	11	-	5,967
Repurchase of shares	-301	-203	-203
Dividend paid to Parent Company's shareholders	-601	-588	-588
Dividend paid to non-controlling interest	-19	-24	-24
Transactions with non-controlling interest	6	-14	-14
Cash flow from financing activities	-1,395	2,241	7,991
Cash flow for the period	-1,007	-781	213
Liquid assets at the beginning of the period	2,451	2,202	2,202
Exchange rate difference in liquid assets	54	29	36
Liquid assets at end of period 11	1,498	1,450	2,451

Quarterly consolidated income statement

MSEK	Q3 2019	Q2 2019	Q1 2019	Q4 2018	Q3 2018	Q2 2018	Q1 2018	Q4 2017
Sales	7,914	8,445	8,496	11,018	6,419	7,953	7,766	10,150
Cost of goods sold	-6,236	-6,508	-6,645	-8,230	-4,980	-6,154	-6,028	-7,632
Gross income	1,678	1,937	1,851	2,788	1,439	1,799	1,738	2,518
Gross margin, %	21.2	22.9	21.8	25.3	22.4	22.6	22.4	24.8
Other operating income	24	94	18	57	10	66	23	21
Marketing expenses	-589	-658	-620	-735	-611	-700	-598	-680
Administrative expenses	-338	-391	-374	-378	-365	-352	-371	-429
Research and development costs	-248	-300	-264	-277	-326	-348	-316	-378
Other operating expenses Share of income in associated companies	11	-18	-	-22	-224	5	-22	-33
and joint ventures	-20	-34	-20	-11	16	-12	-7	-24
Operating income (EBIT) ¹⁾	518	630	591	1,422	-61	458	447	995
Operating margin, %	6.5	7.5	7.0	12.9	-1.0	5.8	5.8	9.8
Financial income	77	32	46	113	48	18	14	-29
Financial expenses	-195	-98	-127	-211	-90	-232	-130	-77
Net financial items	-118	-66	-81	-98	-42	-214	-116	-106
Income before taxes	400	564	510	1,324	-103	244	331	889
Taxes	-105	-135	-113	-316	11	-45	-80	-286
Net income for the period	295	429	397	1,008	-92	199	251	603
of which Parent Company's shareholders' interest	269	433	398	982	-94	183	242	601
of which non-controlling interest	26	-4	-1	26	2	16	9	2
Earnings per share before dilution, SEK ²⁾	2.02	3.24	2.98	8.28	-0.81	1.58	2.09	5.20
Earnings per share after dilution, SEK ³⁾	2.01	3.23	2.97	8.23	-0.81	1.57	2.08	5.16
1) Of which depreciation/amortisation and write-downs	-331	-344	-328	-232	-266	-211	-207	-202
2) Average number of shares before dilution	133,103,705	133,476,269	133,526,144	118,568,062	115,728,074	115,849,107	115,726,045	115,626,887
3) Average number of shares after dilution	133,702,351	134,039,937	134,137,373	119,249,887	116,499,013	116,610,780	116,581,489	116,516,137

Quarterly consolidated statement of comprehensive income

MSEK	Q3 2019	Q2 2019	Q1 2019	Q4 2018	Q3 2018	Q2 2018	Q1 2018	Q4 2017
Net income for the period	295	429	397	1,008	-92	199	251	603
Other comprehensive income/loss:
Items that will not be reversed in the income statement:
Revaluation of net pension obligations	-649	-1,130	410	-742	-28	-901	-40	-326
Tax attributable to revaluation of net pension obligations	134	232	-84	153	6	139	10	73
Total	-515	-898	326	-589	-22	-762	-30	-253
Items that may be reversed in the income statement:
Translation differences	177	29	176	18	-110	141	124	139
Net gain/loss on cash flow hedges	-110	133	-38	-257	67	-152	195	10
Tax attributable to net gain/loss on cash flow hedges	23	-31	10	64	-11	25	-36	-6
Total	90	131	148	-175	-54	14	283	143
Other comprehensive income/loss for the period	-425	-767	474	-764	-76	-748	253	-110
Net comprehensive income/loss for the period	-130	-338	871	244	-168	-549	504	493
of which Parent Company's shareholders' interest	-158	-342	873	212	-159	-547	483	476
of which non-controlling interest	28	4	-2	32	-9	-2	21	17

Key ratios by quarter

MSEK	Q3 2019	Q2 2019	Q1 2019	Q4 2018	Q3 2018	Q2 2018	Q1 2018	Q4 2017
Equity/assets ratio, (%)	33.6	34.0	35.4	35.0	29.0	28.7	31.5	31.7
Return on capital employed, % ³⁾ Return on equity, % ³⁾	11.0 13.1	9.1 10.5	8.5 8.6	8.7 8.1	7.7 7.1	9.6 9.7	9.4 9.6	10.5 10.9
Equity per share, SEK ¹⁾ ³⁾	142.99	144.44	152.12	145.43	114.05	116.51	126.18	121.86
Free cash flow, MSEK ³⁾ Free cash flow per share after dilution, SEK ²⁾ ³⁾	-1,865 -13.95	-989 -7.38	-2,137 -15.93	2,504 21.00	-2,507 -21.52	-781 -6.70	-2,411 -20.68	1,772 15.21

1) Number of shares excluding treasury shares 132,824,280 133,383,129 133,569,408 133,482,880 115,524,571 115,931,576 115,766,638 115,685,451 2) Average number of shares after dilution 133,702,351 134,039,937 134,137,373 119,249,887 116,499,013 116,610,780 116,581,489 116,516,137 3) For more information and explanations regarding the usage of these key ratios, please see saabgroup.com, investor, financial data, key ratios.

Quarterly information per operating segment

		Operating		Operating		Operating		Operating
MSEK	Q3 2019	margin	Q2 2019	margin	Q1 2019	margin	Q4 2018	margin
Sales
Aeronautics	1,794		1,971		2,124		2,654
Dynamics	960		1,537		1,392		2,287
Surveillance	1,876		1,795		1,724		2,302
Support and Services	1,526		1,292		1,349		1,657
Industrial Products and Services	1,377		1,672		1,574		1,879
Kockums	690		705		797		1,029
Internal sales	-309		-527		-464		-790
Total	7,914		8,445		8,496		11,018
Operating income/loss
Aeronautics	122	6.8%	166	8.4%	197	9.3%	309	11.6%
Dynamics	24	2.5%	160	10.4%	113	8.1%	422	18.5%
Surveillance	189	10.1%	213	11.9%	90	5.2%	371	16.1%
Support and Services	158	10.4%	140	10.8%	182	13.5%	320	19.3%
Industrial Products and Services	-7	-0.5%	71	4.2%	69	4.4%	139	7.4%
Kockums	21	3.0%	-3	-0.4%	34	4.3%	45	4.4%
Corporate	11		-117		-94		-184
Total	518 -	6.5%	630 -	7.5%	591 -	7.0%	1,422 -	12.9%
MSEK	Q3 2018	Operating margin	Q2 2018	Operating margin	Q1 2018	Operating margin	Q4 2017	Operating margin
Sales
Aeronautics	1,489				2,042
Dynamics
			1,871				2,373
	912		1,064		1,056		2,450
Surveillance	1,518		1,799		1,778		1,966
Support and Services Industrial Products and Services	1,077 1,278		1,400 1,559		1,336 1,391		1,656 1,623
Kockums	637		880		745		763
Internal sales	-492		-620		-582		-681
Total	6,419		7,953		7,766		10,150
Operating income/loss
Aeronautics	113	7.6%	95	5.1%	163	8.0%	184	7.8%
Dynamics	23	2.5%	44	4.1%	46	4.4%	393	16.0%
Surveillance	41	2.7%	150	8.3%	69	3.9%	281	14.3%
Support and Services	32	3.0%	159	11.4%	174	13.0%	253	15.3%
Industrial Products and Services	-18	-1.4%	54	3.5%	27	1.9%	76	4.7%
Kockums	44	6.9%	42	4.8%	42	5.6%	47	6.2%
Corporate	-296		-86		-74		-239

2017 has been restated according to the structural changes described in the annual report 2017, pages 47-52.

Multi-year overview

MSEK	2018	2017	2016	2015	2014
Order bookings	27,975	30,841	21,828	81,175	22,602
Order backlog at 31 December	102,184	107,233	107,606	113,834	60,128
Sales	33,156	31,666	28,631	27,186	23,527
Sales in Sweden, %	41	42	43	42	45
Sales in Europe excluding Sweden, %	14	14	17	18	19
Sales in North America, %	10	9	10	9	10
Sales in Latin America, %	12	8	7	6	2
Sales in Rest of the World, %	24	27	23	25	24
Operating income (EBIT)	2,266	2,250	1,797	1,900	1,659
Operating margin, %	6.8	7.1	6.3	7.0	7.1
Depreciation/amortisation and write-downs less depreciation/
amortisation and write-downs of lease aircraft	916	839	946	959	864
EBITDA	3,182	3,089	2,743	2,859	2,523
EBITDA margin, %	9.6	9.8	9.6	10.5	10.7
Income after financial items	1,796	2,099	1,611	1,731	1,523
Net income for the year	1,366	1,508	1,175	1,402	1,168
Total assets	56,128	44,998	41,211	35,088	29,556
Equity	19,633	14,285	13,301	12,912	11,373
Free cash flow ¹⁾	-3,195	852	2,359	-726	-1,094
Return on capital employed, % ¹⁾	8.7	10.5	8.9	11.2	11.1
Return on equity, % ¹⁾	8.1	10.9	9.0	11.5	9.9
Equity/assets ratio, %	35.0	31.7	32.3	36.8	38.5
Earnings per share before dilution, SEK ¹⁾²⁾	11.27	12.79	9.85	11.90	10.03
Earnings per share after dilution, SEK ¹⁾²⁾	11.21	12.70	9.79	11.81	9.96
Dividend per share, SEK	4.50	5.50	5.25	5.00	4.75
Equity per share, SEK ¹⁾²⁾	145.43	121.86	114.17	111.99	98.83
Number of employees at year-end	17,096	16,427	15,465	14,685	14,716
Number of shares excluding treasury shares as of 31 December ²⁾	133,482,880	115,685,451	115,232,495	114,746,834	114,251,832
Average number of shares before dilution ²⁾	116,467,822	115,444,915	114,971,098	114,484,478	114,929,422
Average number of shares after dilution ²⁾	117,144,915	116,310,466	115,775,275	115,280,946	115,785,595

1) For more information and explanations regarding the usage of these key ratios, please see saabgroup.com, investor, financial data, key ratios.

2) The average number of shares outstanding have for all periods reported been adjusted in accordance with IAS 33, Earnings per share, in accordance with

the terms of the rights issue completed in 2018.

2017 has been restated according to the accounting principles regarding revenue recognition (IFRS 15).

Key ratios and goals

<	Long-term target	Jan-Sep 2019	Jan-Sep 2018	Full Year 2018
Organic sales growth, %	5	11	2	4
Operating margin, %	10	7.0	3.8	6.8
Equity/assets ratio, %	30	33.6	29.0	35.0

Parent company

The Parent Company includes units within the business areas Aeronautics, Surveillance, Support and Services, and Industrial Products and Services as well as one unit within Dynamics. Group staff and Group support are also included. A major part of the Group's operations is included in the Parent Company. Separate notes to the Parent Company's financial statements and a separate description of risks and uncertainties for the Parent Company have therefore not been included in this interim report.

Parent company income statement

MSEK	Jan-Sep 2019	Jan-Sep 2018	Full Year 2018
Sales	15,485	14,224	20,998
Cost of goods sold	-12,252	-11,244	-16,287
Gross income	3,233	2,980	4,711
Gross margin, %	20.9	21.0	22.4
Operating income and expenses	-3,170	-3,265	-4,432
Operating income (EBIT)	63	-285	279
Operating margin, %	0.4	-2.0	1.3
Financial income and expenses	148	155	1,210
Income after financial items	211	-130	1,489
Appropriations	-	-	-114
Income before taxes	211	-130	1,375
Taxes	-69	41	-300
Net income for the period	142	-89	1,075

Parent company balance sheet

MSEK Note	30 Sep 2019	31 Dec 2018	30 Sep 2018
ASSETS
Fixed assets:
Intangible fixed assets	649	617	581
Tangible fixed assets	3,886	3,709	3,615
Financial fixed assets	7,308	7,197	7,095
Total fixed assets	11,843	11,523	11,291
Current assets:
Inventories	6,937	6,159	6,352
Current receivables	16,937	16,812	15,454
Short term investments	3,834	9,000	1,745
Liquid assets	849	1,623	700
Total current assets	28,557	33,594	24,251
TOTAL ASSETS	40,400	45,117	35,542
SHAREHOLDERS' EQUITY AND LIABILITIES
Equity:
Restricted equity	3,386	3,386	2,964
Unrestricted equity	10,213	10,849	4,082
Total shareholders' equity	13,599	14,235	7,046
Untaxed reserves, provisions and liabilities:
Untaxed reserves	2,405	2,405	2,291
Provisions	1,517	1,327	1,325
Liabilities 8	22,879	27,150	24,880
Total untaxed reserves, provisions and liabilities	26,801	30,882	28,496
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES	40,400	45,117	35,542

Liquidity, financing, capital expenditures and number of employees

The Parent Company's net debt amounted to MSEK 5,495 as of 30 September 2019 compared to MSEK 564 as of 31 December 2018.

Investments in tangible fixed assets amounted to MSEK 534 (738). Investments in intangible assets amounted to MSEK 75 (40). At the end of the period, the Parent Company had 9,812 employees compared to 9,672 at the beginning of the year.

Notes To the financial statements

NOTE 1 Corporate information

Saab AB (publ.), corporate identity no. 556036-0793, with registered office in Linköping, Sweden. The company's head office is located at Olof Palmes gata 17, 5tr, SE-111 22 Stockholm, Sweden, and the telephone number +46-8-463 00 00. Saab's B shares are listed on Nasdaq Stockholm since 1998 and on the large cap list as of October 2006. The company's operations, including subsidiaries, associated companies and joint ventures, are described in the annual report 2018.

NOTE 2 Accounting principles

The consolidated accounts for the first nine months of 2019 have been prepared in accordance with IAS 34 Interim Reporting and the Annual Accounts Act. The Parent Company's accounts have been prepared in accordance with the Annual Accounts Act and the Swedish Financial Reporting Board's recommendation RFR 2, Accounting for Legal Entities. The Group's accounting principles are described on pages 90- 91, and concerning significant income statement and balance sheet items in each note disclosure in the annual report 2018.

The interim report is condensed and does not contain all the information and disclosures in the annual report and should therefore be read together with the annual report 2018. All the information on pages 1-29 constitutes the interim report for the period 1 January to 30 September 2019.

The Group and the Parent Company use the accounting principles and calculation methods as described in the annual report 2018 with the exception that one new standard has entered into force for financial year beginning 1 January 2019: IFRS 16 Leases. For effects of changes in accounting principle, IAS 8 and the transition rules in the standard have been applied.

IFRS 16 Leases

The IASB's new standard for lease recognition, IFRS 16 Leases, replaces IAS 17 Leases and is applied as of 1 January 2019.

For new accounting principles associated with IFRS 16 Leases, refer to note 46 in the annual report 2018.

For transition effects in connection with the switch to IFRS 16, refer to note 16 in this report.

The Parent Company will not recognise leases in the balance sheet. Instead leasing fees will continue to be expensed on a straight-line basis over the lease term in accordance with the exemption from IFRS 16 in RFR 2, Accounting for Legal Entities.

NOTE 3 Segment reporting

Saab is a leading high-technology company, with its main operations in defence, aviation and civil security. Operations are primarily focused on well-defined areas in defence electronics, missile systems, and naval systems as well as military and commercial aviation. Saab is also active in technical services and maintenance. Saab has a strong position in Sweden and the main part of sales is generated in Europe. In addition, Saab has a local presence in Australia, the US, South Africa, and in other selected countries. Saab's operating and management structure is divided into six business areas, which are also operating segments: Aeronautics, Dynamics, Surveillance, Support and Services, Industrial Products and Services, and Kockums. In addition, Corporate comprises Group staff and departments, a minority portfolio containing Saab's ownership interests in companies in various stages of development as well as other operations outside the core operations.

The Group's operating segments recognise all lease contracts as operating leases.

Aeronautics

Aeronautics is a world-leading manufacturer of innovative aerial systems and is engaged in development of military aviation technology. It also conducts long-term future studies of manned and unmanned aircraft as preparation for new systems and further development of existing products.

Dynamics

Dynamics offers a market-leading product portfolio comprising ground combat weapons, missile systems, torpedoes, unmanned underwater vehicles, systems for training and simulation, signature management systems for armed forces around the world, and niche products for the civil and defence markets.

Surveillance

Surveillance provides efficient solutions for safety and security, for surveillance and decision support, and for threat detection, location, and protection. The portfolio covers airborne, ground-based and naval radar, electronic warfare and combat systems and C4I solutions.

Support and Services

Support and Services offers reliable, cost-efficient service and support for all of Saab's markets. This includes support solutions, technical maintenance and logistics as well as products, solutions and services for military and civil missions.

Industrial Products and Services

The business units within Industrial Products and Services are focused on mainly civilian customers.

Kockums

Kockums develops, delivers, and maintains world-class solutions for naval environments. Its portfolio includes submarines with the Stirling system for air independent propulsion, surface combatants, mine hunting systems and autonomous vessels. Kockums' unique competence is in signature management, impact strength and advanced stealth technology.

Order bookings per operating segment

	Jan-Sep	Jan-Sep	Change,	Q3		Q3 Full Year
MSEK	2019	2018	%	2019	2018	2018
Aeronautics	1,201	2,680	-55	317	532	5,261
Dynamics	4,503	3,845	17	1,357	1,272	7,308
Surveillance	7,639	5,406	41	5,443	1,364	7,370
Support and Services	3,016	2,386	26	1,540	511	3,635
Industrial Products
and Services	3,867	3,576	8	1,326	931	5,344
Kockums	923	748	23	379	218	1,123
Internal	-2,056	-1,458		-979	-309	-2,066
Total	19,093	17,183	11	9,383	4,519	27,975
Order bookings per region
			Jan-Sep	Jan-Sep	Change,	Full Year
MSEK			2019	2018	%	2018

Order bookings per region

	Jan-Sep 2019	Jan-Sep 2018	Change, %	Full Year 2018
Sweden	4,827	5,752	-16	8,203
Rest of Europe	7,371	4,014	84	6,936
North America	3,136	2,686	17	5,134
Latin America	180	105	71	1,562
Asia	2,459	2,464	-	3,474
Africa	241	174	39	265
Australia, etc.	879	1,988	-56	2,401
Total	19,093	17,183	11	27,975

Order backlog per operating segment

MSEK	30 Sep 2019	31 Dec 2018	30 Sep 2018
Aeronautics	42,670	47,359	47,433
Dynamics	14,364	13,645	12,445
Surveillance	17,150	14,731	15,081
Support and Services	9,597	10,690	11,098
Industrial Products and Services	9,398	11,004	11,113
Kockums	5,386	6,646	7,300
Internal	-2,561	-1,891	-2,070
Total		96,004 102,184 102,400

Order backlog per region

MSEK	30 Sep 2019	31 Dec 2018	30 Sep 2018
Sweden	29,549	33,942	35,726
Rest of Europe	15,252	12,304	11,043
North America	7,483	6,923	5,588
Latin America	31,925	34,909	34,739
Asia	8,180	10,206	11,406
Africa	561	682	686
Australia etc.	3,054	3,218	3,212
Total		96,004 102,184 102,400

Sales per operating segment

MSEK	Jan-Sep 2019	Jan-Sep 2018	Q3 2019	Q3 2018	12 Months	Rolling Full Year 2018
Aeronautics	5,889	5,402	1,794	1,489	8,543	8,056
Dynamics	3,889	3,032	960	912	6,176	5,319
Surveillance	5,395	5,095	1,876	1,518	7,697	7,397
Support and Services	4,167	3,813	1,526	1,077	5,824	5,470
Industrial Products and Services	4,623	4,228	1,377	1,278	6,502	6,107
Kockums	2,192	2,262	690	637	3,221	3,291
Internal	-1,300	-1,694	-309	-492	-2,090	-2,484
Total	24,855	22,138	7,914	6,419	35,873	33,156

Sales per region

MSEK	Jan-Sep 2019	% of sales	Jan-Sep 2018	% of sales	Full Year 2018	% of sales
Sweden	9,263	37	9,298	42	13,519	41
Rest of Europe	3,671	15	3,107	14	4,768	14
North America	2,648	11	2,007	9	3,155	10
Latin America	3,175	13	2,537	11	3,821	12
Asia	4,656	19	3,925	18	6,148	19
Africa	264	1	270	1	361	1
Australia, etc.	1,178	5	994	4	1,384	4
Total	24,855	100	22,138	100	33,156	100

Information on large customers

During the first nine months of 2019, Saab had one customer that accounted for 10 per cent or more of the Group's sales: the Swedish Defence Materiel Administration (FMV). FMV is a customer of all business areas and total sales amounted to MSEK 6,570 (7,124).

Seasonal variation

A major part of Saab's business is related to large projects where the revenue is recognised by using the percentage of completion method. The costs incurred in these projects are normally lower during the third quarter compared to other quarters. The fourth quarter is also usually affected by a higher number of deliveries, mainly within Dynamics.

Operating income per operating segment

	Jan-Sep	% of	Jan-Sep	% of	Q3	Q3		Rolling Full Year
MSEK	2019	sales	2018	sales	2019		2018 12 Months	2018
Aeronautics	485	8.2	371	6.9	122	113	794	680
Dynamics	297	7.6	113	3.7	24	23	719	535
Surveillance	492	9.1	260	5.1	189	41	863	631
Support and Services		480 11.5	365	9.6	158	32	800	685
Industrial Products
and Services	133	2.9	63	1.5	-7	-18	272	202
Kockums	52	2.4	128	5.7	21	44	97	173
The operating
segments' operating
income	1,939	7.9	1,300	5.9	507	235	3,545	2,906
Corporate	-200		-456		11	-296	-384	-640
Total	1,739	7.0	844	3.8	518	-61	3,161	2,266
Depreciation/amortisation and write-downs per operating segment	Jan-Sep Jan-Sep				Q3	Q3		Rolling Full Year
MSEK	2019	2018	Change,	%	2019		2018 12 Months	2018
Aeronautics	45	42		7	16	15	59	56
Dynamics	55	55		-	18	18	75	75
Surveillance	222	202		10	75	67	293	273
Support and
Services	15	64		-77	5	55	20	69
Industrial Products
and Services	64	65		-2	22	22	87	88
Kockums	27	22		23	8	7	35	30
Corporate	575	234		146	187	82	666	325
Total	1,003	684		47	331	266	1,235	916

Operational cash flow per operating segment

	Jan-Sep Jan-Sep		Q3	Q3		Rolling Full Year
MSEK	2019	2018	2019		2018 12 Months	2018
Aeronautics	-3,697		-2,617 -1,257	-654	-2,176	-1,096
Dynamics	-111	-574	-172	-184	343	-120
Surveillance	-72	-1,452	-294	-975	295	-1,085
Support and Services	-654	142	-597	-54	-427	369
Industrial Products
and Services	-264	-403	18	-259	-212	-351
Kockums	-222	92	-422	-331	-63	251
Corporate	664	-385	1,070	10	657	-392
Total	-4,356		-5,197 -1,654 -2,447		-1,583	-2,424

Capital employed per operating segment

MSEK	30 Sep 2019	31 Dec 2018	30 Sep 2018
Aeronautics	7,199	3,110	4,368
Dynamics	3,938	3,774	3,554
Surveillance	8,554	7,781	7,624
Support and Services	4,316	3,307	3,079
Industrial Products and Services	4,938	4,515	4,364
Kockums	1,246	1,181	1,129
Corporate	5,529	9,335	2,221
Total	35,720	33,003	26,339

Full time equivalents (FTE's) per operating segment

Number at end of the period	30 Sep 2019	31 Dec 2018	30 Sep 2018
Aeronautics	3,405	3,212	3,164
Dynamics	2,316	2,252	2,219
Surveillance	3,792	3,770	3,768
Support and Services	1,898	1,851	1,864
Industrial Products and Services	3,668	3,566	3,535
Kockums	1,195	1,205	1,196
Corporate	981	903	897
Total	17,255	16,759	16,643

NOTE 4 Distribution of sales

		Aeronautics		Dynamics		Surveillance		Support and Services		Industrial Products and Services		Kockums		Corporate/ elimination		Group
MSEK	Jan-Sep 2019	Jan-Sep 2018	Jan-Sep 2019	Jan-Sep 2018	Jan-Sep 2019	Jan-Sep 2018	Jan-Sep 2019	Jan-Sep 2018	Jan-Sep 2019	Jan-Sep 2018	Jan-Sep 2019	Jan-Sep 2018	Jan-Sep 2019	Jan-Sep 2018	Jan-Sep 2019	Jan-Sep 2018
External sales	5,695	5,127	3,766	2,847	5,233	4,866	4,078	3,722	3,665	3,295	2,179	2,253	239	28	24,855	22,138
Internal sales	194	275	123	185	162	229	89	91	958	933	13	9	-1,539	-1,722	-	-
Total sales	5,889 -	5,402 -	3,889 -	3,032 -	5,395 -	5,095 -	4,167 -	3,813 -	4,623 -	4,228 -	2,192 -	2,262 -	-1,300 -	-1,694 -	24,855 -	22,138 -
Sales by customer:
Military customers	5,695	5,122	3,553	2,629	5,203	4,810	3,508	3,073	814	736	2,179	2,253	226	28	21,178	18,651
Civilian customers	-	5	213	218	30	56	570	649	2,851	2,559	-	-	13	-	3,677	3,487
Total external sales	5,695 -	5,127 -	3,766 -	2,847 -	5,233 -	4,866 -	4,078 -	3,722 -	3,665 -	3,295 -	2,179 -	2,253 -	239 -	28 -	24,855 -	22,138 -
Sales by significant source:
Long-term customer contracts	5,090	4,670	1,574	1,218	3,640	3,475	1,756	1,483	2,128	1,715	1,624	1,761	225	28	16,037	14,350
Services	601	452	508	504	1,190	1,016	1,833	1,847	1,379	1,435	529	492	14	-	6,054	5,746
Products	4	5	1,684	1,125	403	375	489	392	158	145	26	-	-	-	2,764	2,042
Total external sales	5,695 -	5,127 -	3,766 -	2,847 -	5,233 -	4,866 -	4,078 -	3,722 -	3,665 -	3,295 -	2,179 -	2,253 -	239 -	28 -	24,855 -	22,138 -
Sales by domain:
Air	5,695	5,127	377	204	2,529	2,545	2,834	2,537	240	243	-	-	114	16	11,789	10,672
Land	-	-	2,410	1,725	852	813	632	565	406	453	-	-	-	-	4,300	3,556
Naval	-	-	836	785	1,746	1,451	155	132	10	6	2,179	2,253	125	12	5,051	4,639
Civil Security	-	-	139	125	19	26	113	126	1,414	1,232	-	-	-	-	1,685	1,509
Commercial Aeronautics	-	-	-	-	-	1	344	362	1,095	854	-	-	-	-	1,439	1,217
Other	-	-	4	8	87	30	-	-	500	507	-	-	-	-	591	545
Total external sales	5,695	5,127	3,766	2,847	5,233	4,866	4,078	3,722	3,665	3,295	2,179	2,253	239	28	24,855	22,138
Sales recognition method:
Over time	5,684	5,114	2,037	1,582	4,474	4,068	3,218	2,882	2,183	2,035	2,152	2,133	225	28	19,973	17,842
Point in time	11	13	1,729	1,265	759	798	860	840	1,482	1,260	27	120	14	-	4,882	4,296
Total external sales	5,695	5,127	3,766	2,847	5,233	4,866	4,078	3,722	3,665	3,295	2,179	2,253	239	28	24,855	22,138

NOTE 5 Non-recurring items

The non-recurring items are related to identified efficiency improvements to increase productivity and are reported in the income statement per function as shown below.

MSEK	Jan-Sep 2019	Jan-Sep 2018	Q3 2019	Q3 2018	Full Year 2018
Cost of goods sold	-	-41	-	-41	-41
Administrative expenses	-	-3	-	-3	-3
Research and development costs	-	-54	-	-54	-54
Other operating expenses	-	-200	-	-200	-200
Total	-	-298	-	-298	-298

NOTE 6 Dividend to Parent Company's shareholders

The Annual General Meeting 2019, held on 11 April, decided on a dividend to the Parent Company's shareholders of SEK 4.50 per share, corresponding to a total dividend of MSEK 601.

The record date for the dividend was 15 April 2019 and the dividend was paid out on 18 April 2019.

NOTE 7 Intangible fixed assets

MSEK	30 Sep 2019	31 Dec 2018	30 Sep 2018
Goodwill	5,420	5,310	5,271
Capitalised development costs	4,227	3,328	3,011
Other intangible assets	517	419	368
Total	10,164	9,057	8,650

NOTE 8 Net liquidity/debt

MSEK	30 Sep 2019	31 Dec 2018	30 Sep 2018
Assets:
Liquid assets	1,498	2,451	1,450
Short-term investments	3,860	9,003	1,747
Total liquid investments	5,358	11,454	3,197
Short-term interest-bearing receivables	52	-	-
Long-term interest-bearing receivables	528	449	493
Long-term receivables attributable to pensions	6	6	40
Total interest-bearing assets	5,944	11,909	3,730
Liabilities:
Lease liabilities	2,531	-	-
Liabilities to credit institutions	8,603	8,759	8,973
Liabilities to associated companies
and joint ventures	47	43	42
Other interest-bearing liabilities	5	462	462
Provisions for pensions ¹⁾	5,295	4,105	3,503
Total interest-bearing liabilities and provisions
for pensions	16,481	13,369	12,980
Net liquidity (+) / net debt (-)	-10,537	-1,460	-9,250

1) Excluding provisions for special employers' contribution attributable to pensions.

Committed credit lines

MSEK	Facilities	Drawings	Available
Revolving credit facility (Maturity 2022)	6,000	-	6,000
Overdraft facility (Maturity 2019)	79	-	79
Total	6,079	-	6,079

Parent Company

MSEK	30 Sep 2019	31 Dec 2018	30 Sep 2018
Long-term liabilities to credit institutions	6,543	7,773	8,560
Short-term liabilities to credit institutions	2,060	986	411
Total	8,603	8,759	8,971

Since 2009, Saab has a Medium Term Note programme (MTN) to enable the issuance of long-term loans on the capital market. During the first quarter 2018, the MTN programme was increased from MSEK 6,000 to MSEK 10,000.

Under the terms of this programme, Saab has issued fixed rate bonds as well as Floating Rate Notes (FRN). During September 2019 bonds to a value of MSEK 201 matured, meaning that outstanding loans under the MTN programme amounts to MSEK 7,530. In December 2015, Schuldschein loans with a value of MEUR 100 were signed.

NOTE 9 Capital employed

MSEK	30 Sep 2019	31 Dec 2018	30 Sep 2018
Total assets	57,327	56,128	46,071
Less non-interest bearing liabilities	21,607	23,125	19,732
Capital employed	35,720	33,003	26,339

NOTE 10 Financial instruments

Classification and categorisation of financial assets and liabilities ²⁾

Carrying amount	30 Sep 2019	31 Dec 2018	30 Sep 2018
Financial assets:
Valued at amortised cost ⁴⁾:
Accounts receivable, contract assets and other
receivables	17,543	16,254	14,513
Liquid assets	1,498	2,451	1,450
Long-term receivables	715	548	482
Valued at fair value through profit and loss ³⁾:
Short-term investments	3,860	9,003	1,747
Derivatives for trading	166	148	137
Long-term receivables	-	-	39
Financial investments	27	27	28
Derivatives identified as hedges	1,888	948	1,010
Total financial liabilities	25,697	29,379	19,406
Financial liabilities:
Valued at amortised cost:
Interest-bearing liabilities ¹⁾	11,185	9,264	9,476
Other liabilities ⁴⁾	7,287	8,626	6,740
Valued at fair value through profit and loss ³⁾:
Derivatives for trading	25	74	73
Derivatives identified as hedges	2,688	1,160	1,018
Total financial liabilities	21,185	19,124	17,307
¹⁾ Fair value	11,253	9,437	9,658

²⁾ Derivatives with positive values are recognised as assets and derivatives with negative values are recognised as liabilities. Derivatives with a legal right of offset amount to MSEK 1,878.

³⁾ The impact of credit risk on these instruments is considered low given the limits in the current investment policy

⁴⁾ Carrying amount, in Saab's assessment, essentially corresponds to fair value.

Valuation methods for financial assets and liabilities

The fair value of listed financial assets is determined using market prices. Saab also applies various valuation methods to determine the fair value of financial assets that are traded on an inactive market or are unlisted holdings. These valuation methods are based on the valuation of similar instruments, discounted cash flows or customary valuation methods such as Garman-Kohlhagens.

Level 1

According to listed (unadjusted) prices on an active market on the closing day:

• Bonds and interest-bearing securities
• Electricity derivatives
• Interest rate forwards

Level 2

According to accepted valuation models based on observable market data from Reuters Datascope :

• Forward exchange contracts: Future payment flows in each currency are discounted by current market rates to the valuation day and valued in SEK at period-end exchange rates.
• Options: The Garman-Kohlhagens option-pricing model is used in the market valuation of all options.
• Interest swaps and cross currency basis swaps: Future variable interest rates are calculated with the help of current forward rates. These implicit interest payments are discounted to the valuation date using current market rates. The market value of interest rate swaps is obtained by contrasting the discounted variable interest payments with the discounted present value of fixed interest payments.

Level 3

According to accepted principles, e.g. for venture capital firms:

• Unlisted shares and participations

As of 30 September 2019, the Group had the following financial assets and liabilities at fair value:

	30 Sep
MSEK		2019 Level 1	Level 2	Level 3
Bonds and interest-bearing securities	3,860	3,860	-	-
Forward exchange contracts	1,902	-	1,902	-
Cross currency basis swaps	142	-	142	-
Electricity derivatives	10	10	-	-
Shares, participations and long-term receivables
	27	-	-	27
Total	5,941	3,870	2,044	27

Assets at fair value Liabilities at fair value

MSEK	30 Sep	2019 Level 1	Level 2	Level 3
Forward exchange contracts Interest rate swaps	2,556 157	- -	2,556 157	- -
Total	2,713	-	2,713	-

NOTE 11 Supplemental information on statement of cash flows

Free cash flow

MSEK	Jan-Sept 2019	Jan-Sept 2018	Q3 2019	Q3 2018	Full Year 2018
Cash flow from operating activities before changes in working capital, excluding taxes and other financial items ¹⁾	2,969	2,166	839	511	4,026
Cash flow from changes in working capital:
Contract assets and liabilities	-5,585	-4,145	-2,525	-331	-3,039
Inventories	-1,134	-1,312	-296	-488	-1,057
Other current receivables	2,512	543	1,099	-247	-1,044
Other current liabilities	-967	-134	-128	-990	1,965
Provisions	-150	-322	-54	-156	-479
Change in working capital	-5,324	-5,370	-1,904	-2,212	-3,654
Cash flow from operating activities excluding taxes and other financial items	-2,355	-3,204	-1,065	-1,701	372
Investing activities:
Investments in intangible fixed assets	-1,141	-920	-351	-334	-1,338
Investments in tangible fixed assets	-890	-1,079	-242	-412	-1,481
Sales and disposals of tangible fixed assets	30	6	4	-	23
Cash flow from investing activities ²⁾	-2,001	-1,993	-589	-746	-2,796
Operational cash flow	-4,356	-5,197	-1,654	-2,447	-2,424
Taxes and other financial items	-594	-560	-208	-60	-862
Sale of and investments in financial assets	-41	50	-3	-	43
Investments in operations	-	5	-	-	15
Sale of subsidiaries	-	3	-	-	33
Free cash flow	-4,991	-5,699	-1,865	-2,507	-3,195

1) Including amortisation of lease liabilities

2) Cash flow from investing activities excluding change in short-term investments and other interest-bearing financial assets and excluding sale of and investment in financial assets, investments in operations and sale of subsidiaries. If investments in and sale of financial fixed assets are considered to be of operating nature, the item is included in investing activities.

Free cash flow vs. statement of cash flows Liquid assets

MSEK	Jan-Sep Jan-Sep 2019	2018	Q3 2019	Q3 2018	Full Year 2018
Free cash flow	-4,991		-5,701 -1,865 -2,509		-3,195
Investing activities – interest-bearing:
Short-term investments Other financial investments and	5,173	2,712	2,402	1,596	-4,554
receivables	-92	-35	-52	-30	-29
Financing activities:
Repayments of loans	-201	-750	-201	-716	-967
Raising of loans	8	3,820	3	1,070	3,820
Rights issue	11	-	-	-	5,967
Repurchase of shares	-301	-203	-150	-203	-203
Dividend paid to the Parent Company's
shareholders	-601	-588	-	-	-588
Dividend paid to non-controlling interest	-19	-24	-19	-13	-24
Transactions with non-controlling interest	6	-14	2	-7	-14
Cash flow for the period	-1,007	-781	120	-810	213

MSEK	30 Sep 2019	31 Dec 2018	30 Sep 2018
The following components are included in liquid assets:
Cash and bank balances	898	1,300	1,050
Bank deposits	600	1,151	400
Total according to balance sheet	1,498	2,451	1,450
Total according to statement of cash flows	1,498	2,451	1,450

NOTE 12 Business combinations

No significant acquisitions through business combinations were made in the first nine months of 2019.

NOTE 13 Defined-benefit plans

Saab has defined-benefit pension plans where post-employment compensation is based on a percentage of the recipient's salary.

Pension obligation according to IAS 19

MSEK	30 Sep 2019	31 Dec 2018	30 Sep 2018
Defined-benefit obligation	12,514	10,752	10,375
Special employers' contribution	1,382	1,008	937
Less assets under management	7,225	6,653	6,911
Total provisions for pensions	6,671	5,107	4,401
of which reported as long-term receivable	6	6	40

Actuarial gains and losses are recognised in other comprehensive income. Actuarial losses related to pensions amounted to MSEK -1,369 net in the first nine months of 2019 primarily due to the following:

The assumed discount rate has been reduced by 100 basis points, from 2.25% to 1.25%, compared to the beginning of the year, which has resulted in an actuarial loss. The inflation assumption has been reduced by 25 basis points, from 2.0% to 1.75%, during the same period, which has resulted in an actuarial gain. The net of revised assumptions related to the discount rate and inflation amounted to MSEK -1,620.

Positive experience adjustments, mainly related to lower actual versus assumed inflation, has resulted in an actuarial gain of MSEK 50.

The actuarial loss related to the special employer's contribution amounted to MSEK -267.

The return on assets under management was higher than expected, which produced an actuarial gain of MSEK 468.

NOTE 14 Contingent liabilities

No additional significant commitments have arisen during the period. With regard to the Group's so-called performance guarantees for commitments to customers, the likelihood of an outflow of resources is estimated as remote and, as a result, no value is recognised.

NOTE 15 Transactions with related parties

No significant transactions have occurred during the period.

Related parties with which the Group has transactions are described in the annual report 2018, note 38.

NOTE 16 Implementation of IFRS 16 Leases

As of 1 January 2019, Saab has applied the new standard IFRS 16 to all leases where the Group is the lessee with the exception of the leases described below.

The Group has no significant leases as a lessor.

The Group has applied the simplified approach in the transition to IFRS 16, due to which comparative amounts are not restated. The Group has also applied the exemptions in the standard for short-term leases as well as leases where the underlying asset is of low value, which means that leases where the term is not more than 12 months, as well as leases where the underlying asset is of low value, are not covered by the new accounting principle and instead are expensed in the same way as before on a straight-line basis over the lease term.

IFRS 16 has been applied to all leases previously classified as operating leases. In accordance with the practical expedients in IFRS 16 p.C3b, the Group has not assessed any lease components in contracts that were not already classified as leases according to IAS 17 and IFRIC 4.

Right-of-use assets for leases recognised in the balance sheet have been measured initially, as of 1 January 2019, at an amount corresponding to the lease liability with adjustments for prepaid or accrued lease fees attributable to the contract as of 31 December 2018. The lease liability has been calculated by discounting remaining future contractual lease fees by the Group's weighted marginal loan rate as of 1 January 2019, which amounted to 4.1%.

Finance leases on aircraft and properties that were already classified as tangible fixed assets have been reclassified to right-of-use assets in the balance sheet.

The transition to IFRS 16 does not affect reporting, performance indicators or alternative performance indicators for the Group's operating segments. Adjustments in accordance with IFRS 16 are made at an overarching Group level.

See the following tables for transition effects for the first nine months of 2019 in connection with the implementation of IFRS 16.

Effects on opening balance as of 1 January 2019

Statement of financial position MSEK	31 Dec 2018 Actual	Adjustment IFRS 16	1 Jan 2019 Restated
ASSETS
Tangible fixed assets	6,129	-441	5,688
Right of use assets	-	2,725	2,725
Other fixed assets	11,015	-	11,015
Total fixed assets	17,144	2,284	19,428
Other receivables ¹⁾	507	44	551
Prepaid expenses and accrued income	919	-63	856
Other current assets	37,558	-	37,558
Total current assets	38,984	-19	38,965
TOTAL ASSETS	56,128	2,265	58,393
SHAREHOLDERS' EQUITY AND LIABILITIES
Parent Company's shareholders' interest	19,412	-	19,412
Non-controlling interest	221	-	221
Total shareholders' equity	19,633	-	19,633
Long-term interest-bearing liabilities ¹⁾	8,196	-421	7,775
Long-term lease liabilities ¹⁾	-	2,296	2,296
Other provisions	1,081	32	1,113
Other long-term liabilities	5,319	-	5,319
Total long-term liabilities	14,596	1,907	16,503
Short-term interest-bearing liabilities ¹⁾	1,068	-41	1,027
Short-term lease liabilities ¹⁾	-	399	399
Other short-term liabilities	20,831	-	20,831
Total current liabilities	21,899	358	22,257
Total liabilities	36,495	2,265	38,760
TOTAL SHAREHOLDERS' EQUITY AND LIABILITIES	56,128	2,265	58,393

¹⁾ Adjustments effecting net liquidity/-debt as of 1 January 2019

Reconciliation between operating leases (according to IAS 17) and recognised lease liabilities (according to IFRS 16)

MSEK

Carrying lease liabilities, 1 January 2019	2,695
Effect of discounting	-472
Leases of low value (expensed in income statement)	-29
Short-term leases (expensed in income statement)	-71
Financial lease liabilities as of 31 december 2018	462
2018	2,805
Obligations for operating leases as of 31 december

Effects on consolidated income statement, consolidated statement of financial position and key ratios for the first nine months of 2019

Consolidated income statement	Jan-Sept	Jan-Sept	Jan-Sept
MSEK	2019 incl.	2019 IFRS 16	2019 excl.
	IFRS 16	effect	IFRS 16
Sales and other operating income	24,991	-	24,991
Cost of goods sold and operating expenses	-22,249	328	-22,577
Depreciation and amortisation	-1,003	-293	-710
Operating income (EBIT)	1,739	35	1,704
Net financial items	-265	-63	-202
Income before taxes	1,474	-28	1,502
Taxes	-353	6	-359
Net income for the period	1,121	-22	1,143
Consolidated statement of financial position	30 Sept 2019	30 Sept 2019	30 Sept 2019
	incl. IFRS 16	IFRS 16	excl. IFRS 16
MSEK		effect
ASSETS
Right of use assets	2,500	2,500	-
Other fixed assets	18,535	-417	18,952
Total fixed assets	21,035	2,083	18,952
Total current assets	36,292	-15	36,307
TOTAL ASSETS	57,327	2,068	55,259
EQUITY AND LIABILITIES
Total equity	19,239	-22	19,261
Interest bearing liabilites	16,481	2,058	14,423
Non-interest bearing liabilities	21,607	32	21,575
Total liabilites	38,088	2,090	35,998
TOTAL EQUITY AND LIABILITIES	57,327	2,068	55,259
Key ratios	Jan-Sept 2019 incl.	Jan-Sept 2019 excl.
MSEK	IFRS 16	IFRS 16
EBITDA, MSEK	2,742	2,414
EBITDA margin, %	11.0	9.7
Operating income, MSEK	1,739	1,704
Operating margin, %	7.0	6.9
Net income for the period, MSEK	1,121	1,143
Earnings per share before dilution, SEK	8.25	8.41
Earnings per share after dilution, SEK	8.21	8.37
Net liquidity(+)/Net debt(-)	-10,537	-8,525
Equity/assets ratio, %	33.6	34.9
Return on capital employed, %	11.0	11.3
Return on equity, %	13.1	13.2
Equity per share, SEK	142.99	143.16
Operational cash flow, MSEK	-4,356	-4,388
Free cash flow. MSEK	-4,991	-4,960
Free cash flow per share after dilution, SEK	-37.25	-37.01

NOTE 17 Definitions

Below are definitions of financial key ratios that are used in the report. For more information and explanations regarding the usage of these key ratios, please see saabgroup.com, investor, financial data, key ratios.

Capital employed

Total assets less non-interest-bearing liabilities.

Earnings per share

Net income for the period attributable to the Parent Company's shareholders, divided by the average number of shares before and after full dilution.

EBITDA

Operating income before depreciation/amortisation and write-downs.

EBITDA margin

Operating income before depreciation/amortisation and write-downs as a percentage of sales.

Effective tax rate

Current and deferred taxes as a percentage of income before tax.

Equity/assets ratio

Equity in relation to total assets.

Equity per share

Equity attributable to the Parent Company's shareholders divided by the number of shares, excluding treasury shares, at the end of the period.

Free cash flow

Cash flow from operating activities including amortisation of lease liabilities and cash flow from investing activities, excluding acquisitions and divestments of short-term investments and other interest-bearing financial assets.

Free cash flow per share

Free cash flow divided by the average number of shares after dilution.

Gross margin

Gross income as a percentage of sales.

Net investments

Acquisitions and divestments of intangible and tangible fixed assets, and acquisitions and divestments of non-interest-bearing financial assets.

Net liquidity/net debt

Liquid assets, short-term investments and interest-bearing receivables less interest-bearing liabilities and provisions for pensions excluding provisions for pensions attributable to special employers' contribution.

Non-recurring items

Non-recurring items of profit with a significant impact on the results and which are important for understanding the underlying business development.

Operating margin

Operating income (EBIT) as a percentage of sales.

Operational cash flow

Cash flow from operating activities, excluding taxes and other financial items, amortisation of lease liabilities and acquisitions and divestments of intangible and tangible fixed assets.

Order backlog

Total value of orders at the end of the period.

Order bookings

Total value of orders received during the period.

Organic sales growth

Change in sales in percentage adjusted for effects from exchange rate due to the translation of foreign subsidiaries, and structural changes such as acquisitions and divestments of subsidiaries.

R&D expenditures

Research and development costs are recognised separately and comprise the cost of self-financed new and continued product development as well as amortisation of capitalised development costs. Total research and development expenses also include the part of Saab's research and development that is conducted in cooperation with customers, which is reported as cost of goods sold.

Return on capital employed

Operating income plus financial income (rolling 12 months) as a percentage of average capital employed.

Return on equity

Net income for the period (rolling 12 months) as a percentage of average equity.

Glossary

C4I	Command, Control, Communications, Computers, and Intelligence
FMV	Swedish Defence Materiel Administration
FRN	Floating Rate Note
FTE	Full Time Equivalent, corresponds to one employee working full-time for one year
IAS	International Accounting Standards

• IFRS International Financial Reporting Standards
• IFRIC International Financial Reporting Interpretations Committee
• ISR Intelligence, Surveillance and Reconnaissance systems
• MTN Medium Term Note, bonds with a duration of 1-15 years

Linköping 22 October 2019

Håkan Buskhe President and CEO and Board member

Review report

Saab AB (publ.), organisationsnummer 556036-0793.

Introduction

We have reviewed the condensed interim financial information (interim report) of Saab AB as of 30 September 2019 and the nine-month period then ended. The board of directors and the CEO are responsible for the preparation and presentation of the interim financial information in accordance with IAS 34 and the Swedish Annual Accounts Act. Our responsibility is to express a conclusion on this interim report based on our review.

Scope of Review

We conducted our review in accordance with the International Standard on Review Engagements ISRE 2410, Review of Interim Report Performed by the Independent Auditor of the Entity. A review consists of making inquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures.

A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing, ISA, and other generally accepted auditing standards in Sweden. The procedures performed in a review do not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the interim report is not prepared, in all material respects, in accordance with IAS 34 and the Swedish Annual Accounts Act, regarding the Group, and with the Swedish Annual Accounts Act, regarding the Parent Company

Stockholm 22 October 2019 PricewaterhouseCoopers AB

Bo Hjalmarsson Authorised Public Accountant

Important information

This interim report may contain forward-looking statements which reflect Saab AB's current view on future events and financial and operational development. Words such as "intend", "expect", "anticipate", "may", "believe", "plan", "estimate" and other expressions which imply indications or predictions of future development or trends, and which are not based on historical facts, are intended to identify forward-looking statements. Forwardlooking statements inherently involve both known and unknown risks and uncertainties as they depend on future events and circumstances. Forwardlooking statements do not guarantee future results or development and the actual outcome could differ materially from the forward-looking statements.

This information is such that Saab AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact person set out below, on 22 October 2019 at 07.30 (CET).

Media: Saab press center ph +46 734 18 00 18 Petter Larsson, Media Relations Manager ph +46 734 18 70 37

Financial market: Merton Kaplan, Head of Investor Relations ph +46 734 18 20 71

Press and financial analyst conference 22 October 2019 at 10.00 (CET), Saab AB, floor 5 Olof Palmes gata 17, 111 22 Stockholm

Contact Marie Bergström to register and for more information, ph +46 8 463 02 45

You are welcome to participate on site at Saab AB, watch the live webcast or dial in to the conference call. It is possible to post questions also over the web and conference call.

Live webcast: http://saab-interimreport.creo.se/191022/

Conference call: Please, dial in using one of the numbers below: Sweden: +46 8 505 583 56 UK: +44 333 300 9268 US: +1 833 526 8347

The interim report, the presentation material and the webcast will be available on saabgroup.com.

Contact Calendar

Year-end report 2019 Published 7 February 2020

Annual General Meeting 2020 1 April 2020 in Stockholm

Interim report January–March 2020 Published 24 April 2020

Interim report January–June 2020 Published 17 July 2020

Interim report January–September 2020 Published 21October 2020

2019: Q3