Saab Stock

Good morning, everyone, and welcome to the presentation of Saab's report for the third quarter 2026. My name is Johan Andersson, and I will be the moderator here today and also responsible for Investor Relations. With me here in Stockholm, I have our CEO, Micael Johansson, and our CFO, Anna Wijkander. Micael and Anna will present the report, and then thereafter, we will start the Q&A session. [Operator Instructions] So with that, a warm welcome, and over to you, Micael.

Thank you, Johan, and most welcome also from my side. Thank you for joining this morning. Maybe not the best weather in Stockholm today, but still weather. Starting with the highlights of the quarter, of course, we still see a huge demand in the market, and investments are going -- ongoing in many countries. Of course, it's a bit different in different parts of Europe to start with in terms of our region. I still think they're moving ahead quite quickly in the right direction. I mean, the Baltic states, the Nordic countries, and also Poland and Germany.

We've had a very strong first 9 months, and we have been growing more than 27% organically and also grown our EBIT substantially with 39%. So it's a strong year and also this quarter, of course, which we'll come back to in more detail. We continue to invest heavily in production capacity, and I will sort of detail that a bit later in the presentation, but we are on a rolling investment level of above SEK 8 billion a year only in capacity investments, and that's absolutely necessary looking at our backlog now, which is now SEK 364 billion. And we will show how that is stretched over time, but it's also quite a lot in the next 2 years, and the rest is sort of in a good way balanced over the next few years.

We have a good cash flow, and we are strengthening our balance sheet as we speak. Of course, the cash flow is completely dependent on good payments from our customers, and we have had a couple of big ones this quarter supporting that. So we are confident about our cash conversion. And then, of course, I have done a couple of changes in my group management, supporting growth and innovation. I think we are moving into a bit of a new phase where, of course, we have to make sure that our existing products and capacity increases are coming into play, but also we are investing heavily in R&D to make sure that we are relevant in the future.

So that's a bit of a sort of phase change, I think, and that made it a good timing to move a couple of new BA heads into my organization. So I have a new business area head for Aeronautics, Marcus Wandt, who used to be my strategy responsible in corporate management, and also in the Dynamics business area, I moved Anders Carp, my Deputy CEO, into that BA position, but he will still remain as the Deputy CEO.

So looking at a couple of, not a couple, a few really strong things that happened during the quarter in terms of order bookings and contracting, this is a fantastic picture, of course, looking at a few big ones. And a major milestone was, of course, being in Kyiv in early July to sign the contract for the Gripen E. And that is something that is just the start of a journey together with Ukraine on fighter aircraft. Having them now building up an Air Force with the Gripen that will suit them fantastically in terms of how dispersed you can be, how agile you can be, and how much combat mass you will get from that.

Everything will start with the donation of 16 C/D versions to Ukraine as soon as possible. And then we will start our deliveries of the Gripen E's to Ukraine in '29. We also have contracted another country for GlobalEye during the summer, which we're not talking about exactly which country. And that is really, really good as well, of course. And the interest, as you know, for GlobalEye is substantial in the market. We are strong on the naval side, and we have now combined the combat management area with sort of our more the submarine and surface vessels capability in 1 business area, as we talked about last quarter.

And now during the summer, we got another contract for the German frigates to support or supply, I mean, sensors and combat management systems and a few other things on these vessels, which is really, really good. And I hope there will be more vessels coming of the same configuration now in the future. We also continue our future journey when it comes to what sort of complements the Gripen E aircraft and what will be after the Gripen E, but then we're talking decades ahead, and that will definitely be something sophisticated unmanned.

And that is supported by the Swedish end users and the Swedish Defence Materiel Organization. So we've got the contract on that as well. And of course, on the product side, one important contract was from Finland, the air defense system, RBS 70, during this quarter as well. So those are a few of important things that highlights, you could say, in the marketplace.

Our figures then, really good order intake, huge increase from the comparative period last year, SEK 65 -- almost SEK 66 billion. And we are now at SEK 152 billion 9 months in order intake. And as I said, a huge order backlog supporting our growth going forward. Strong organic growth above 30%, SEK 20 -- 20-plus billion in revenue, and also increasing our EBIT even more than the top line, reaching almost SEK 2 billion in EBIT.

And as I said, a very good cash flow, but of course, that's connected to big customer payment, which it should be because when we move into the large platform contracts, the business model must be that we get early payments, early milestone payments, and sometimes you can call it advanced payments, but that's part of our business model to actually manage these contracts. So good cash flow and means that we are during the period up until now at 77% cash conversion, which is excellent, above the 60% guiding.

A few highlights from the 4 business areas to start with. As we talked about, the Gripen Ukraine contract was, of course, a major thing happening. So now Aeronautics is having a backlog of over SEK 100 billion. And also adding the new contract on the future systems from Sweden is very important to us. We have more than 600 people working the future of what's complementing Gripen E and also beyond the Gripen E contract already, just to create sort of a sense of that this is a really substantial project.

And we have had good execution, and a couple of very important milestones to us is to fly the first 2-seater version of the Gripen during the quarter, and we also saw the first Gripen E from the Brazilian factory flying during the quarter. Very important ramp-up capability also in the Brazilian hub that we have, of course. And then we have now started to show how we see the future when it comes to the unmanned sophisticated capability, which we call and have named the fantastic name A3.

It might be called something else in the future, but that is an uncrewed aircraft, which will complement the Gripen E, of course. Aeronautics is still sort of affected by underabsorption and ramp-up costs when it comes to the T-7, as we've said before. And in a way, they are improving their profitability despite these facts. Dynamics, very good demand in the market across the portfolio, and the growth was 10% and the EBIT was roughly 15%.

And I get questions on why is it not so higher than that. And this is a mixed business. I mean, we have batch deliveries, and every quarter is looking a bit different. So I still say 9 months is 24% growth and almost 18% EBIT. So this is sort of not something that is a trend looking at this quarter. We have a huge backlog of over SEK 90 billion. So I see a solid year for Dynamics and a strong quarter going forward.

We talked about the large order from Finland when it comes to air defense systems, and we also have collaboration projects like the IRIS-T missile, which we also got a rather large contract on that. And we have still product contracts coming from the U.S., both on the AT4 system, anti-tank weapon system, and also Carl-Gustaf, very important sort of product coming all the time. Still high book-to-bill of 2.

And we have, of course, a continuous implementation of the capacity investments we're doing in Dynamics, lots of construction projects to build new capability, and I'll come back to that. Surveillance, extremely strong quarter, very well-positioned portfolio on the sensor side with, of course, the GlobalEye, which is really attractive in the market. As you know, we have NATO selecting GlobalEye. We're negotiating a contract with them, roughly 10 aircraft.

And also Canada have selected in May the GlobalEye. And we have signed now during the quarter term sheet sort of scoping the contract parameters. So we are entering into a real contract phase now for Canada for 6 aircraft. And the idea is to set up a hub in Canada to build these aircrafts in Canada, still Saab taking the responsibility for the delivery to the customers, of course. But also during the quarter, we had Netherlands selecting GlobalEye.

So they want to add 1 system to be operated from Sweden together with the Swedish Air Force, and that is a government-to-government agreement. But we, of course, will deliver the aircraft on a contract with the Swedish FMV. So that's going to happen hopefully now shortly and during the year. And there's a big, big push and execution positive thing happening within Surveillance, and the sensor business is really going in a good direction, including, of course, on top of that, we have the airborne warning business.

So that drives the substantial sort of growth of 65%. And also on 9 months, they have a fantastic growth. So we had a big splash last week when we rolled out the first Swedish GlobalEye. That was not in the third quarter then, but in the fourth quarter, and that is now coming into there shortly. So Sweden will get this capability early 2027 in operation.

Naval, as I mentioned, the important contract for the German Navy when it comes to the frigates with momentum to get more on that side. So we have a substantial naval business now in Germany, both for the frigates that are called 123, very special name, which is almost a very substantial contract refurbishing the whole ships and also adding our equipment. And now this contract that I mentioned, which is supporting the sensors and the combat management systems and flight control system to the German frigates named 128.

And we have, of course, started the submarine project together with Poland and already started our expansion on the Landskrona site, not only in Karlskrona. So we have capacity expansion also on the naval side to manage both the Swedish and the Polish contract, and this is going according to plan. And a very important milestone for the future is that we have now demonstrated a fully autonomous underwater vehicle that will be an ISR sensing capability underwater, complementing and acting together with the manned submarines.

And that is, of course, a demonstrator, but that also in the underwater domain, we will see autonomous systems in the future. So this investment that we have done on R&D and then supported by FMV is very, very important to us. Good growth over 40% and a huge backlog, of course, dominated by the Polish submarine contract. Also, Combitech has had a very good quarter, growing again and good sort of momentum in the defense and telecom segments, of course, and also a couple of specific contracts when it comes to weather systems and military radio system integrations.

And Combitech is a very skillful workforce that are involved in the AI development for Saab working using the Sferical data center that was inaugurated a week ago roughly, which Saab is a part of together with other industries. So we have compute capability to train our models, and Combitech is quite involved in that together with our Combitech organization. And we've had growth and also a good profitability level of almost 11% during the quarter.

On the sustainability side, yes, our business is growing substantially. And so during the quarter, we actually had an increased emission mainly due to lots of flight tests, both for GlobalEye and the Gripen side of things. But all in all, over time, looking at the scientific-based target objectives, we are on a good path, meeting our objectives on that. We are now -- have reduced our emissions 34% since we started this in 2020, and we have been recognized by Time Magazine and Statista as the world's most sustainable aerospace and defense company.

And this is exactly what we have said. We want to be a market leader in the sustainability area as a defense company. So that's really nice to see. And then we have also published a climate transition plan, showing how we will reach our scientific-based targets and eventually net zero emissions. So things are moving in a very nice way in this area as well.

A few comments sort of lastly on this capacity expansion, which is not only the product side of things. We talk a lot about all the constructions that we're doing in the western part of Sweden. But on the Aeronautics side, we're moving from roughly 15 aircraft per year to between 25 and 30 aircraft per year. So lots of initiatives to grow capacity on that side. And also, of course, making sure that when we now start flying sort of the autonomous systems, which are the future capabilities, they must also be industrialized to manufacture.

And T-7 production is still ramping up. I mean, the levels we have to reach there is sort of very high. I mean, it's somewhere between 50 to 80 depending on contracts going forward from the U.S. Air Force and others. So we're investing doing that as well. Dynamics, you know it's all about missile production capacity and ground combat expansion. And we will soon inaugurate now shortly the U.S. facility in Grayling, Michigan, and a bit later, the India facility outside Delhi to support our growth here.

So that's moving in a good way. Surveillance, I said that we have to go from 2 aircraft per year to 6 aircraft per year looking at the market interest and also on the contracts that we are now getting into the business and a huge capacity ramp-up for radars. I mean, we're talking hundreds of radars every year now, which has not been the case for a defense company earlier. So that's good that we have production capacity both in Gothenburg, but also in the U.K.

And of course, I said that we're moving on to another site to do things also on the submarine side because we have to, in parallel now work with the Polish contract and the Swedish contract. And there are also other type of businesses within the naval side as the combat boat. So we're building a completely new facility in the northern part of Sweden to support expansion on that side. So all in all, as I said, on a rolling 12, above SEK 8 billion in only capacity investments.

This is important, but we have also grown our R&D investments 47% during the first 9 months compared to the same period last year. So it's both things you have to do simultaneously, of course, to be relevant in the market going forward. And I think with that, I think, yes, it's correct. That was my last slide, and I will hand over to Anna then that will dive a little bit deeper into the numbers.

Okay. Thank you, Micael, and good morning, everyone, from my side as well. As you have heard, this was another quarter with high business activity. We closed several large platform contracts, and we continue to increase our deliveries to our customers. That is also reflected in our financial performance this quarter with a strong order intake, strong sales growth, EBIT growth as well as a record high operational cash flow.

We will soon dig into the details in the financials, but I will start with looking at some trends and taking a more long-term perspective and see where we are in terms of the period where we have guided for in our midterm targets. So let me start by sales. We now have reached sales of SEK 93 billion on a rolling 12-month basis. And we have a compounded average growth rate during this period of 24%.

The adjusted EBIT margin reached SEK 9.6 billion, and that corresponds to an even higher CAGR of 33% for this period. So we're growing the EBIT more than we grow the sales, as we have said that we are going to do. And also, our operational cash flow for the last 12 months, rolling 12 months correspond to SEK 14.1 billion, a substantial increase this last year. This is despite that we have increased our investments to SEK 8.1 billion.

So the cumulative cash conversion is now 77% for this period. A significant increase in our cash flow was this quarter was related to large customer advanced payments, which we now are going to use in our operations to make sure that we deliver on our customer contracts. So with that, altogether, we continue to deliver a profitable growth while also maintaining a strong cash flow profile.

Turning to the third quarter earnings and the development. Gross income increased by 32% and the gross margin improved to 23.4% compared to 22.9% last year, the same quarter. The improvement was mainly driven by sales growth and also the business mix reflecting a higher share of Surveillance this quarter. The group EBIT reached SEK 1.95 billion. That's an increase of 42% year-on-year.

And the EBIT margin increased to 9.5% compared to 8.7% in Q3 '25. The main drivers here are also sales growth, but I also want to mention that we are leveraging on our sales and administrative expenses, and this contributed by 1.7 percentage points in the quarter. However, as we have said, we continue to increase our R&D investments in future capabilities, which is according to our strategy to continue to be relevant in the future, and that this increase is also going to be continued in the future.

Turning then to the business areas, and let's start with Surveillance and Dynamics. Surveillance more than doubled its operating income this quarter from SEK 446 billion (sic) [ 446 million ] to SEK 939 billion (sic) [ 939 million], and the EBIT margin improved to 13.7%, up from 10.8% in Q3 '25. This improvement was driven by the Surface Sensor business and the GlobalEye in particular, with higher volumes and good project execution. Looking ahead into Q4, I think I want to mention 2 things that you should remember that last year in Q4, we had a capital gain from a divestment of the TransponderTech business of SEK 336 million. We also had impact in Q4 last year at Surveillance from the prestart of the GlobalEye contract to France. So this means that we are entering into a more challenging comparison period for Surveillance.

Dynamics then reported, as we heard, a bit lower margin this quarter, 14.3%. And last year, we were at 19.3%. And the lower result, this is reflected by the mix and also somewhat higher R&D expenses. And this is very visible in the graph that the margins within Dynamics is varying a lot depending on mix and deliveries and something that we are used to see. But all in all, we have a strong momentum in Dynamics. And as Micael said, this momentum support a solid end to the year for Dynamics as well.

Moving to Aeronautics and business area Naval. Both these business areas increased their EBIT compared to last year. Aeronautics delivered an EBIT of SEK 331 million compared to SEK 212 million and the EBIT margin also increased to 6.8% compared to 4.8% last year. This was supported by good strong project execution, also a favorable mix in this business area, and we have also seen an impact from our export contracts impacting this margin expansion. Continuing, we have the T-7 program, which is impacting our profitability negatively within Aeronautics. We have said that before that we are in the ramp-up phase, and we are currently now also running on a bit higher negative impact from that program than the previously guided SEK 100 million per quarter.

In the business area Naval, the EBIT margin was 6.1% compared to 7.5% in the third quarter last year. A bit lower, though, but the underlying project execution remained good. And now with this order backlog that we have, we have a strong foundation for Naval's continued development. The lower margin this quarter is related to somewhat higher R&D expenses as well as some start-up costs related to our capacity expansion within Naval. Altogether, these -- both business area increased EBIT while continuing to ramp up output to secure customer deliveries.

Let's turn to our cash flow. For the first 9 months, we have delivered a strong cash flow. Cash flow from operations amounted to -- before changes in working capital amounted to SEK 8.6 billion. And the change in working capital this first 9 months contributed SEK 5.7 billion, and it was driven by large customer payments, and that is including the advanced payment that we have received for the Polish submarine contract as well as the advanced payment for the GlobalEye contracts.

At the same time, we continue to invest significantly in our capacity expansion, and we have investing activities amounting SEK 6.5 billion during this period. And the operational cash flow by then end at SEK 7.7 billion year-to-date. After financial items and tax, our free cash flow is SEK 5.1 billion. So altogether, a good cash flow and also further strengthened financial position.

Also worth mentioning is the improvement in our return on capital employed that is now amounting to 16.7%. That is both driven by higher profitability, but also as better capital turnover. The strong cash flow is further strengthened our balance sheet during the quarter, and the net liquidity now amount SEK 8.5 -- 8.7 billion at the end of Q3 compared to SEK 2.5 billion at the end of the second quarter. And the cash and liquid investment totaled SEK 26.1 billion. And also, I would like to mention that during the quarter, we did our first euro-denominated bond transaction of EUR 300 million with a 7-year tenure. And this represents an important step for us in the company's funding strategy to further diversifying our financing platform. In addition, from a financing perspective, we have an unutilized revolving credit of SEK 6 billion as well. And the net debt-to-EBITDA ratio was negative minus 0.6x on a rolling 12-month basis. So all in all, a solid and strong balance sheet.

Let's turn then to our order backlog of SEK 364 billion. It's well balanced today across our 4 business area with almost 1/4 in each business area. And looking at the delivery profile, we have increased the backlog to be delivered in the final quarter with 18% compared to last year. And for the next year, we are up 63%, amounting to SEK 102 billion to be converted into sales. We also see growth across all the delivery period, which is reflected by the larger platform orders that we have taken. So altogether, the backlog provides good visibility, both in near-term and long-term growth.

Finally, let me turn to our medium-term targets. We remain confident in the targets for the period '23 to '27. They are supported by strong market demand, increasing defense spending as well as our large order backlog. We are also seeing benefits from higher delivery volumes and improved scalability across the company. So all in all, we continue to invest in production capacity, technology for future capabilities and that will support our longer-term development.

So before we take the questions, I would also like to announce a final date in your calendar. And that is that we would like to provide an early notice that we will have a Capital Markets Day on the 12th of May 2027 in Linkoping. And further information and registration details will be provided when we come closer to the event, but save the date for your calendar. And with that, I hand over to you for the Q&A, Johan.

Thank you very much, Anna and Micael. And let us start the Q&A session.

And let's start with -- I've got 2 questions here over the web interface. One first one to Micael. You saw a decline in the margins in Dynamics. And do you see this as -- it's coming from Piotr at Trigon. Do you see this as a trend? Or do you see that we can move back here in the final quarter of the year? And how should we view the year then for Dynamics? And on that one also, you talked about increased R&D and also the mix in deliveries. What will you actually -- what are you doing here in the R&D side in Dynamics?

No, I don't see this as a trend at all. I said that it differs between the quarters, and that was quite visible also on the slide that Anna showed. And then it depends on sort of the batch deliveries and all that. And as you see, they have a huge backlog, and they have a solid end of the year. So this is not a trend. And if you look at the first 9 months, it's almost 18% EBIT level and 24% growth. So no, it's not a trend, still high demand in the market. So I look at this as a promising business going forward.

Yes, we have to invest in R&D. And this is -- we actually have formed a new business unit within Dynamics, which is focusing on sort of effectors that are more like looking like drones rather than missiles or support weapon type of ammunition because there will be lighting ammunition capability needed. There will be one-way effectors needed and a few other things. And then we, of course, work with the counter-UAS systems as well, partly with sort of effectors from Dynamics, but also from the whole system side from Surveillance. So that's sort of the focus of our investments. And then continuously, we look at new ammunition types for Carl-Gustaf support weapons as we speak. So need for being relevant in the future, of course, but also increasing capacity, and they are going in a very good way, I think.

Great. Thank you very much. Operator, should we see if we have any questions over the telephone conference?

The first question comes from the line of David Holmes from Bank of America.

I have a couple of questions. The first one's on the Aeronautics margin. So I guess revenue slowed in Q3, but actually your margin expansion was, I think, 200 basis points. I think you called out mix as a driver here. Can you just help us understand what those mix tailwinds actually are and perhaps their sustainability?

So on the Aeronautics margin, it is, of course -- it is affected quite a lot by the T-7 sort of ramp-up. And that is -- that I've said that many times, but it's a bit of a struggle to get that ramp-up going. And well, now the U.S. Air Force have announced initial operational capability in August next year. So it will be a ramp-up. But it will actually take a few years before we actually are up and running on the level of 50 systems per year that will generate a good business and there are more contracts coming in as well.

So we are roughly, as Anna said, we're slightly above the SEK 100 million per quarter now, but it's not that much above roughly on a yearly basis of SEK 500 million affecting the Aeronautics margin. The contracts on exports that we have received are supporting the margin growth on Aeronautics. So if you take away the T-7, so to say, it is on the level that we've talked about sort of high single-digit numbers. So that's how I see it. And yes, the more volume we get on the Gripen going forward, of course, it will look even better and then we ramp up deliveries, but we have to get out of sort of an up -- we have to ramp up the T-7 and get out of sort of this slow delivery pace that we have today to Boeing.

If I could just follow up on a question on the Naval margins. So I think Q2, you had a provision that caused margins down. I guess, is there any one-offs to flagging the Naval margin in Q3? And I guess I think you're talking about capacity expansion in the Naval segment pressuring margins in Q3. Is that something that we should think about continuing for the next few quarters and perhaps only annualizing in Q3 next year?

I would say that the Naval margin is -- now it's a combination between -- the submarine contracts on Poland, together with the Swedish contract improves the margin, I would say. There is no sort of specific negative thing, but we have the underwater business that is more about the tethered systems and the electrical ROVs and autonomous systems are still not fully profitable, which is pulling the margin down on the Naval side. And then as you know, we've mixed it now with combat management systems, and we have 1 or 2 projects, not the German ones, but the 1 or 2 projects that are pulling the margin down. But the potential is definitely much higher than what you see here today in the mix of things. So we see improvement going forward.

Good. Do we have any other in the queue from the conference call?

[Operator Instructions] The next question comes from the line of Marie-Ange Riggio from Morgan Stanley.

I have actually one question on the Polish submarine program, because you have already recognized some revenue in Q3. So I'm just wondering if you can quantify how much you have quantified in Q3 and how we should think about the revenue recognition profile through 2038 and probably still on the Polish submarine program, we know that it will be diluted at the initial phase. So probably can you give any color about how long we should expect the initial margin dilution to persist? And what is the medium-term margin potential of the program?

So Marie, the question, just to summarize it, I think it was -- you started to get revenues from the Polish submarine contract already now in Q3. Can you quantify it? How much was it? And if it's a little bit dilutive in the beginning, when do you start to see that it's taking off in terms of margin if you are so say, having other costs in ramping up here?

No, I just want to say that, yes, we have revenue from the Polish contract already because we started immediately cutting steel and stuff like that. But I do not want to sort of go specifically into different programs showing exactly what revenue we have. That is not something I want to guide upon. That will differ a bit between quarters depending on milestones that we have, of course, within the program and what's happening. So yes, it's up and running in a very good way, and so is the Swedish program. That's all I can say about the submarine contract.

And tagging on to the question, will it be -- do you see the margin to be good over time here? Or what's your view there in terms of when you're up and ramping with the production here?

No. As I said, I mean, the combination of the Swedish submarine program and the Polish one is a good one, and it's adding to increasing our margin in the naval business, absolutely. But I'm not going to quantify it exactly. We don't give that guidance.

Just probably just a quick follow-up because you just announced your CMD May 12, which is great. Can you probably just give us a bit of color on what we should expect for the CMD in terms of project focus or any like midterm financial targets? Anything that you can say on that would be helpful.

Detailed focus we will come back to, of course, but I would sort of -- I would assume we will talk a lot about sort of the capacity expansion that has come in play, but also what we're doing for the future type of capabilities. The guidance and the things we will come back to sort of in the earlier part of the year. So that will not be the main focus of the Capital Market Day. That will be earlier. We have sort of still 5 quarters to go now, but we, of course, understand that in the beginning of next year, we will talk more about how we will guide going forward in terms of period and also on what parameters. But -- so that's not the main focus. Of course, we will touch upon that, but that's not sort of why we're calling for Capital Market Day in May. That's a bit too late to start talking about that.

Thank you very much. Operator, do we have any further questions from the telephone conference?

Yes. So we now have a question from the line of Fredrik Lithell from Handelsbanken.

I had a little bit more broad-based question, maybe both for Micael and Anna to answer your sourcing situation, a lot of your products are dependent on semiconductors and also rare earth metals. So how do you work now to secure sourcing? And how do you make sure that you not sort of source from risk countries or that you mitigate that as much as you can? And on that note also, do you have any long lead times irrespective of what type of component or material it might be? And do you see sort of price pressure upwards that are hard to mitigate in your situations?

Thank you. Well, we can talk for an hour at least about all these things because it's really, really sort of something we put a lot of effort into, of course. And it's different things. I mean, of course, we work with this diligently, both in terms of making sure, as you said, that we avoid sort of buying things from risk areas to more regionalize it. But then in the depth of the value chain, of course, you cannot control exactly what the raw materials comes from where and also sort of the semiconductor part is, of course, important to have a continuous flow. We see price increases, of course, on memories and semiconductors looking at all the data centers. But we're not a big sort of big embracer or big user of these things in the sense that it affects our cost base dramatically.

But raw materials like aluminum and other rare earth minerals, we can actually store at quantities that will last for years. So we're not sort of the big user that it will affect our stock in a big way. But of course, we have sort of resilience in our supply chain as the major focus now because things are happening every day, and you have to have redundancy sometimes and you have to even maybe acquire companies to make sure that you are vertically integrated on certain things, not so often on that side, but that can happen.

What can I say? It's all over the place, and you have to work it every day in a mix of carrying a bit more stock, making sure you have redundancy, making sure we understand the politics and avoid certain areas, making sure that you have contracts sort of protecting you from sort of inflation perspectives and currency changes in a good way. So it's a basket of things that we have to work with every day. But it's a very relevant question. And if we talk about growth, this is probably the area where you have to focus the most to make sure that you can get your stuff out of the house in the frequency that we have today. I think we've done this in a good way so far, looking at the growth that you see, but it's not something you can sort of be complacent about.

Just to add, I mean, I can just add, we're working very hard on that, and it's very high focus. And -- but I think it's also worth mentioning that we are protected in our business and in our contracts with indexes, and that's something that we need to work continuously with, of course, in this situation as well.

And you have secured your situation with sort of double sourcing on all accounts and all that. So that has already sort of been taken care of since long, or...

As far as you can on certain areas, but you can't have double sourcing on engines for a fighter, for example, even though there's no risk there, of course. We have a great relationship with GE supplying the engines. But sort of, of course, on quite a few things further down the value chain, we have alternatives. But we have to certify them for use in the military perspective. So it's not sort of a change you do from 1 week to the other. It's actually rather cumbersome to certify it and qualify it for use on what we do. But we do that as well, absolutely.

Excellent. Thank you. And we have a question here for Anna coming from AlphaValue. This was a fantastic quarter in terms of cash flow, very, very strong. Should we see this as a new level? And how have you worked so to say, with your contracts? And is there something behind here that you are comfortable with cash flow? Because -- it shows also Q4 normally is a positive cash flow quarter. How -- can you elaborate a little bit around these parameters?

It's a very good question. And as we said, this quarter, we had several customer advanced payments, which impacted this level in the quarter. However, having large advanced payment or early milestone payment is important for us when we grow the company as much as we do because we need to invest early. We need to have money to be able to deliver on the contracts. So this is something that we -- I will say that we have focused very much on and have been better on when it comes to our contracts that we have taken. Then looking into how Q4 is going to look like, I can say that we are going to end this year with a strong cash flow then -- so I think we can stay with there.

Thank you very much. Operator, do we have any other one in the telephone conference queue for a question?

Yes. The next question comes from the line of William Balksten from SB1 Markets.

Just one main question here, if I may. How does the margin in the backlog compare for surveillance with the 13.7% we saw this quarter? And how much operating leverage should we expect as GlobalEye goes from 2 to 6 aircrafts a year?

I mean the backlog is a mix of large platform contracts and product-oriented things. And as you know, the platform things are having a slightly lower sort of margin than the product side. To go into exactly what that means for Surveillance is is maybe not so easy, but I think Surveillance should be on reasonable levels. I've said always sort of above 10%. That depends also on how many sensors on the product side they sell and also how many GlobalEyes -- if I simplify things, they have more in their portfolio, of course. But I would say, driving this sort of profitability and growth, that's the sensor side and airborne early warning definitely. And we have lots of good things in the backlog on that side, as you can see.

Of course, we will get some leverage on the GlobalEye when we expand from 2 to 6 aircraft. But we also have to establish another hub, which is sort of an investment into this and we have a good flow of things in Linkoping sort of finalizing these aircraft, but you need to get up and running, of course, on that also in Canada, which is not happening day 1. So that is sort of the, I would say, something you have to take into that equation. You get operational leverage, but it may be affected a bit by sort of establishing a new hub.

And also maybe to add on that, these GlobalEye contracts, they are normally delivered during a longer period than the product contract that we have. So it's also a mix from that perspective in the backlog, how it's going to turn out.

But we have a good backlog that we're sort of pleased with the backlog definitely.

Great. Did you have any other question?

Yes, just one more short here. You're currently at capacity investments of around SEK 8 billion here a year. And is that level we should expect over the next couple of years? Or are we closer to a peak here?

I would say we -- looking at this, the way we see it, we might still have a rather high level also the coming year, at least. But then it's more hard to say that sort of might be the peak levels that we see '26, '27. And then we might come down a bit. Not exactly how much, I will say, but this is now when we're doing this sort of last year, this year and next year.

Thank you very much. Perfect. Excellent. And maybe a quick question that came in here. You have quite a large investment worth in Helsing. What's the strategy and the view on that from your perspective and the benefit for Saab?

Well, I mean, the equity investment is, of course, minor in terms of percentages. Then the collaboration on AI and other things with Helsing is the more important part of things to sort of get a few shortcuts into that area because AI and AI agents are instrumental to us in our systems as well going forward. So that was the whole idea, so to say. And now of course, the valuation from the last round is, of course, improving also the investments as such, having a bigger value, but that was not sort of the important thing when we went -- it was the collaboration.

Great. And another question from Royal Bank of Canada. On the unmanned side, when do you think in time here that can start to become meaningful? We understand that you partly get this financed to some extent as well. But when do you see this to become larger?

I think sort of in the Western world demand now, I mean, you see what's happening in Ukraine, Millions and millions of drones are being used every year, and they have a fantastic capacity of all kinds of drones. We're looking into different types of unmanned capability. What we're doing on the aeronautics side is more of a sophisticated capability, but cheaper than a fighter aircraft, of course, a lot cheaper, but that can actually carry substantial weapon capability, but also sensing and they're supposed to come back, so to say. They can act on their own, but they can also act together with the Gripen E fighter, for example, but they are not attributable, but they can still take a bit more risk since they are unmanned.

And then we have the lower segment that we're seeing investments coming into play as we speak, then the new business unit sort of in Dynamics doing one-way effectors that can be used either for counter-UAS applications or for, as I said, one-way effectors in terms of actually being almost a missile, but it's a drone. So -- but it's not that huge volumes yet of drones are building -- being acquired by all the defense forces in Europe, for example. We're talking tens of thousands maybe rather than millions because they are training and incorporating these in their concepts of operations as we speak. But it will have to be that capability in all armed forces going forward. So it's now and going forward, I would say. So quantify it is difficult in the Western world, but it will be in the portfolio, and it will be in our market from now and onwards.

Interesting future there. Operator, do we have any further questions from the telephone conference?

Yes. We now have a question from the line of Sash Tusa from Agency Partners.

I've just got a couple. The first, I wonder whether you could just talk a little bit more about the scale of the start-up costs for T-7. Are those start-up costs increasing because the production volumes are increasing? Or are there costs that are independent of the ramp that are increasing to a bigger extent than you had previously forecast? And then the second question, purely detailed, but you mentioned the GlobalEye contract for an undisclosed customer in the third quarter. I think you implied in your initial comments that, that was for a new customer. I wonder if you could just -- whether I could check that I heard you right.

On the last question, on the GlobalEye, yes, a new customer to us, absolutely. Still undisclosed -- still undisclosed, you heard right. When it comes to the ramp-up cost on T-7, it's a combination of investing in more tools to automize the line in a more proper way. It's adjusting the line a bit to make it more sort of suitable for higher volumes. It is lots of training when it comes to people and making sure that the turnover rate on employees is not as high as it's been for certain periods of time. And yes, things like that.

It's hard to say exactly -- some of it is, as you say, sort of independent of the ramp-up thing, but some things we invest in now and working with are definitely connected to the ramp-up. But all in all, you have a factory and you have a big sort of a big amount of people working in the factory and the flows, the number of aircraft getting out of the factory right now is not high enough to support that. That's the simple equation. But it's both what you said, of course. But we're getting there, definitely.

So it's the most modern factory that we have, but it is not easy to sort of move a production facility in the aeronautics arena from the center of gravity in Linkoping with all the aeronautics competence to a new place in West Lafayette and training, finding the right people and having that sort of as a separate working entity. So we're investing a lot to make that happen because there will be hundreds and hundreds and hundreds of aircraft leaving that facility. So it's worth every investments that we do. But of course, I want to see the under absorption go down and not go up really. But right now, we are on the level of roughly SEK 500 million on a yearly basis.

Thank you very much. And operator, do we have a final question from the telephone conference? I think we have 2 minutes schedule left here.

The next question comes from the line of Afonso Osorio from Barclays.

Just one last one on Canada, Micael, if you can expand on your -- if you have any update on your negotiations with Canada for the Gripen and GlobalEye. And I think just to double check, I think last time we spoke in Q2, you said it was for the GlobalEye for 6 aircraft in your negotiation. Is that still the case? Or has anything else changed in the meantime?

So on the GlobalEye, we've signed, as I said, a term sheet now sort of scoping and setting the framework for the final contract and negotiations are ongoing. And I can't exactly say a date and time when it will be signed, but we're moving ahead according to plan on that side. And we're talking about 6 aircraft. That's correct. On the Gripen side, we're running a campaign to convince sort of everyone that is a good match to have a dual fleet with F-35 is good at certain things. And Gripen gives a combat mass perspective and can be used at dispersed air bases and all that.

And then we're setting up a hub to manufacture the Gripen in Canada. So lots of industrial collaboration. But that is a political decision to sort of say, yes, we want this sovereign capability in Canada, and then I think we are the best partners. We have a fantastic offer, but it's still a political decision to take for the Prime Minister Carney. But we're campaigning as much as we can to make it happen. And I'll be there myself next week at an Aerospace Summit conference in Canada. So I will have more of a feeling where we are after that conference, I think.

Thank you. That sounds promising, Micael. And thank you, Anna and Micael, for joining us today. And if you have any further questions, just reach out to the Investor Relations team during the day here. And with that, we close the conference for the third quarter 2026 now and looking forward to host you when we are reporting our Q4 results. Thank you very much.

Thank you.

Thank you.

Good morning, everyone, and welcome to the presentation of Saab's report for the second quarter 2026. My name is Johan Andersson, responsible for Investor Relations, and I will be the moderator here today.

With me here in Stockholm, we have our CEO, Micael Johansson; and our CFO, Anna Wijkander. Micael and Anna will present the report, and thereafter, we will start with the Q&A session. And remember that you can both ask your questions over the telephone or you can post the questions in the web interface, and I will read them out here in Stockholm.

So with that, a warm welcome, and I will hand over to you, Micael.

Thank you, Johan. And also from my side, welcome to the second quarter report. Let's just dive into the highlights immediately. As you've seen, this was another strong quarter with lots of momentum on the business side.

And what's been defining the quarter was, of course, the major contracts that we have received on the submarines in Poland and also the Gripen E version contract with Ukraine, huge sort of breakthroughs and success, of course. And then we are doing extremely well when it comes to improving our way on the operational execution and that drives gross margin and of course, our profitability on the bottom line.

And connected to that is all about sort of production ramp-up and increasing our capacity in achieving this. And since we are investing and have done that for quite a few years now in capacity, this is now coming into play, and we also recruit many skillful employees as we speak, roughly on a number of 3,000 net up a year, which adds to our capacity to deliver to our customers. And that pleases me really well that we are doing well in that area.

We will continue to do that, of course. But on top of that, it's not only about capacity, it's also about future capability. And here, we also deliver more energy into R&D and new capabilities, which we are showing to our customers as we speak. And I think we have increased in the first half year now compared to the first half year last year. I think we've increased R&D with roughly SEK 700 million, which is a big step.

We have a record order backlog, SEK 318 billion, and very strong prospects for the future growth. And I will come back to how that backlog looks like in terms of more short-term deliveries and what's sort of ahead of us beyond like 3 years in terms of deliveries.

So I need, of course, to spend some minutes on the success stories this quarter. And I think it was a big breakthrough when it comes to the contract with the submarines for Poland. They have now contracted us with 3 submarines that will be delivered in the next few years.

And of course, this is not only an industrial success, it's also very good for the Baltic Sea, increasing our underwater capability together with Poland from a security perspective of the Baltic Sea. But it will also entail industrial collaboration with Poland, and we will have sort of shipyard capabilities on both sides of the Baltic Sea, which makes lots of sense in terms of security and redundancy going forward. So we're really happy about this.

And it shows, of course, that this conventional submarine capability is the state-of-the-art capability and is a big evidence of that, that we're doing something really right in this area. Same thing, of course, when it comes to the Gripen fighter, the Gripen E fighter, there's been lots of discussions about Gripen for Ukraine.

And President Zelenskyy was here not so long ago in Uppsala discussing this and telling us that now we will go ahead with this, and he talked about up to 150 aircrafts. And this is now the first batch actually being contracted by Ukraine, 16 Gripen. And -- but we haven't booked this yet. It will be booked in the next quarter due to the fact that there were a couple of administrative things connected to receiving money then from EU that Ukraine has to sort of fulfill and then that will be coming into effect that contract shortly.

Big success, of course, but this is only the first batch, and we will diligently continue to work with the next batch. On top of that, of course, a couple of really big successes on the GlobalEye. And Canada selected the GlobalEye earlier in May, and we are in negotiation now with Canada, and we'll move ahead as quickly as possible to contract that, of course. We're talking about 6 aircrafts.

And then not long ago, last week, I think, it was the NATO Summit and the Industrial Day and was a big release that from the NATO side that they have now selected the GlobalEye. We're talking roughly 10 aircrafts to NATO, replacing the E-3 in Geilenkirchen as a common capability within NATO supported by 9 countries now.

And it will be operational, of course, and supported by all the countries when it comes into play in Geilenkirchen. Big breakthrough, and I think it shows an evidence of how important it is to be in the alliance as a country. And it's also another evidence of what fantastic capabilities we, as an industry, we have sort of to be able to provide to NATO and to have Sweden and Saab to be delivering this sort of strategic capability to NATO is a really big thing.

So it's been a fantastic quarter from a big contract, big sort of selection point of view. And it creates a big balance and good balance between our product sort of offering in the market and also the platform offering. So this is one of my favorite slides, I must say, this year and this quarter.

A few words not going into much detail, but on why this sort of capability, the GlobalEye is so attractive. And we have more in pipeline, but I can't talk about details about that. But it's -- first of all, it's a capability that can actually cover the air, the sea and the land simultaneously.

Normally, earlier, the airborne early warning capability was about the air Surveillance capability. Now this is all domains. And of course, it is also incredibly sophisticated when it comes to how it digests all the information from all the sensors.

The primary sensor on the fuselage, on the roof of the fuselage is, of course, the one that covers sort of the longest distance over 650 kilometers. You don't have to be close to any hostilities. But then there is a passive system as well that surrounds the aircraft. So everything that is looking at you will be detected as well and gives you a passive quality, which is fantastic.

All of the sensor information is fused and managed, of course, and digested by AI capabilities. So the operators in the aircraft and what's linked to the ground or other platform makes sense quickly and you get a situation awareness picture that which you understand in a very sort of skillful way and you have that quickly.

And it is in production. I mean we have these aircrafts in operations in UAE, and we have it in production, so we can deliver it in -- with short lead times, and it adds to a very critical capability gap, of course, this is a node in a network. So it will -- you will have access to the information that this platform gathers also from other platforms like ships and fighter aircrafts or ground centers or even sort of army sort of type of equipment. So it is a really important sort of capability to have strategic and tactical situation awareness. We are really proud about this.

Now back to the numbers. And as you've seen, we had an order intake of slightly more than SEK 68 billion this year, of course, dominated by the big contract on the submarines for Poland, but also the underlying order intake is very good. The good organic growth of almost 30%, and that shows how we actually deliver and how our capacity investments come into play continuously to increase our delivery pace in all areas, I would say.

And then, of course, we increased our profitability in a very good way, driven, of course, by sales, but also more efficient operations and that improves the gross margin and by that, also the bottom line operating margin. We had a 0 type of cash flow quarter, but the half year is roughly SEK 1 billion plus compared to the first half year last year, which was minus SEK 1.1 billion.

And normally, we do have sort of a second half of the year that is a lot better than the half -- first half year. And I just wanted to underline, we have not sort of taken any payments yet connected to the submarine contracts in Poland. So we are confident in delivering a good positive cash flow for this year as well and on track for our guiding on 60% cash conversion over the period.

A few comments on the different business areas from my side. The growth in Aeronautics is connected to good sort of pace and deliveries of Gripen aircraft and -- but also the tactical software capability development adds a lot of revenue to the Aeronautics side of things.

And then, of course, I need to mention that was a big event in Linköping, Sweden when we rolled out the first two-seater of the Gripen called Gripen F because that's also contracted by Brazil, which was a very important milestone, of course. And now these will also come into deliveries as we speak in the next quarter.

We still have issues when it comes to under absorption when it comes to getting up and running on the on the pace of delivering T-7s from our facility in West Lafayette. We're getting there. A very important milestone was reached in the U.S. now where the milestone C, which they call it when they actually start contracting Boeing on batches of aircraft.

We have been working our batches for a while with contracts from Boeing to Saab, but now the U.S. Air Force is starting to operate this aircraft. So now the pace needs to increase going forward. But it will take a few quarters more and a couple of years, I would say, before we actually get back to good numbers on this side.

But eventually, this will be an excellent franchise program over many years. And then, of course, I talked about the Gripen need to Ukraine. So I don't have to go back into that, even though I would like to talk a lot about that. It is a very success story.

Dynamics then, very good market demand still. It's a bit lumpy in sort of when the contracts come in, lots of small contracts, but also a few big ones in the pipeline. So a few to mention now during this quarter is, of course, the NLAW support weapon to France and also another M4 Carl-Gustaf to Lithuania and a training -- vehicle training system to the U.S. Army, which is important contracts and is good underlying pipeline also for Dynamics.

Good deliveries, really good growth, 36% quarter-to-quarter. And we also have new products coming into play. We have a new missile for the RBS 70 system. We have a new ammunition type for the Carl-Gustaf that we've launched. And we have a camouflage net type of product, Poncho for a soldier that is really taking effect now in the market.

So many good things are happening, and there will be more things that we're investing in, in this area coming going forward now. So Dynamics is doing well. And also Surveillance extremely well, a strong demand, and I need to point out that we have high deliveries of products from Surveillance, especially on the sensor side.

As an example, Giraffe 1X is very high demand in the market. So we are manufacturing this on, you could call it, speculation, not only on contract. And I mean, compared to last year, we have done a lot more deliveries, 100 systems already in the first half year, and we are moving to a pace of more than 300 systems a year going forward when we talk about the Giraffe 1X.

Also, of course, GlobalEye has a great pipeline and a big interest in the market. And now as I've talked about, Canada and NATO have selected that. So that negotiations for contracts ongoing. But also here, we work a lot with the counter UAS portfolio, the counter unmanned aerial system portfolio, which is very important part of our portfolio where you -- where we have the components in terms of sensors and command and control, and then we use different type of effectors to take out aerial threats.

And that is a portfolio that I think has a big potential going forward being an open type of architecture system that we have now launched. Good growth, as you can see, 47% quarter-to-quarter, excellent and an increasing backlog.

The Naval side, I must say there's a high demand also in that sort of market. I mean, you know that we didn't get selected together with Babcock on the frigates for Sweden. But you maybe saw yesterday that we were contracted by TKMS Thyssenkrupp Marine System in Germany to provide everything from composite structures to sensors, to command and control to fire control systems for that frigate F128 going forward, 4 of them, that was almost SEK 9 billion in order intake, and they might need another 4 going forward.

So that was a big breakthrough, of course. So there is a demand for that portfolio, I must underline that. And now the contract on the submarines for Poland and in combination with the Swedish contract, of course, means that we are ramping up production capacity both in Karlskrona, the shipyard there and also taking more facilities into play and ramping up capability in Landskrona, the other shipyard where a number of things will be done on the submarine side as well.

We have other contracts also in Australia. We are selected as being the provider of all the surface vessels, and we have received another reasonable contract from them this quarter and also the Combat Boat is increasing in interest in many countries. So we have -- we're building a new facility, increasing our production capacity up north in Docksta outside of Örnsköldsvik for that capability as well.

And we have really good progress on the A26 submarine program in Sweden. The profitability of the Naval side is a little bit weaker than the comparable quarter, but that's due that we took sort of an effect of that we didn't get selected on the Swedish frigate side together with Babcock. So we did a write-down and took the whole effect of that during the quarter. Otherwise, the profitability would have increased also in this area. So that was a once-off. Huge backlog now, of course, due to the contract in Poland.

Combitech is also doing really well. The sales is a bit flat, but that's mainly through effects of the mix between consultant sort of consultant hours and how we treat sort of other more sort of commitment projects delivering things timing-wise. So that's not a problem at all. They are doing well on the growth side as well. So this is more like a timing effect.

But then, of course, the profitability is increasing in a very good way, and we are growing in our commitments and contracts with, for example, the NATO Communications and Information Agency on the cybersecurity side, but also new contracts with the Swedish Defence Materiel Administration.

So Combitech is doing really well, I must say, and that's really good for Saab because it's a resource and competence that we can handle sort of between internal projects within Saab, but also having good contracts externally.

On the Sustainability side, we are doing a lot to, of course, support our commitments to reducing our emissions. This quarter-to-quarter, we did -- this quarter, we actually increased 8% due to lots of business activities, mainly and many, many flight test, test flights, but we are doing well in comparison to the commitment we've done with SBTi. So we're on a good track.

And a couple of examples, you can see here what we're doing, more and more automated capabilities introduced. We have a robot-assisted welding procedure now, which is reducing lots of material and by that also CO2 emissions, of course, Same thing on the aeronautics side.

We use 3D printing and we reduce emissions from that because of material usage and all that. So many small but important parts are being done to improve going forward in the way we do things when it comes to sustainability and environmental aspects of things.

And we are at the second place in the Aerospace and Defense sector in the ranking done by Financial Times and Statista's ranking when it comes to Europe's Climate Leaders. And our ambition is to be a leader in this area going forward and of course, all the time.

Last slide from my side, and I think this slide is important to reflect upon. This shows how our backlog is divided in terms of how much is going to be delivered in the next 2.5 years from now and how much that is increasing quarter-to-quarter, if you look upon a quarter -- second quarter a few years back.

And as you can see, 60% roughly of the backlog is related to things that will be delivered in 2.5 years' time frame. And if you look back to the last -- second quarter last year, that has increased 36%, but now also because of the successes on the platform side, which is a bit longer contracts, of course, if you look upon what will be delivered from year 3 and onwards, that has increased dramatically, of course, from last year second quarter and now is SEK 120 billion and an increase of 132%.

So this is just to show you that even though we get large platform contracts, still our short-term deliveries are increasing also a lot in the backlog, and that's still 60%. So we have a very good mix in our backlog, I must say. So without sort of complicating myself too much into numbers, which I think is Anna's responsibility more.

I will now hand over to Anna for a more detailed review of our numbers. Here you go, Anna.

Thank you, Micael, and good morning, everyone. It's so clear that we have delivered a strong second quarter. We have continued to strengthen our market position and executed on our strategy to both increase our customer deliveries while we, at the same time, are increasing our investments in capacity expansion and also future capabilities.

So altogether, our strategy execution is really reflected in our solid financial performance. So before going into the details into the quarter, I would like to take a step back and look into our performance during the last years and how it is in relation to our financial targets.

And we can see that our sales growth CAGR is now at 24% over this period. And we have done this growth with a profitable growth journey, meaning that we have increased EBIT more. It's at 34% now, supported by expanded gross margin as well as operating leverage.

Our cash conversion reached 53% after this quarter. It was a little bit lower than we were after the first quarter, but a huge improvement compared to where we were last year at the same time. Also, as Micael said, we normally have a more stronger positive cash flow profile in the second half of the year. So altogether, we remain confident that we are well progressing towards our medium-term targets in cash conversion as well.

Now let's look at the numbers more in detail and focusing on gross margin and operating income. We delivered a record gross margin for the single quarter. Importantly is that we expanded the gross margin by more than 1 percentage point compared to last year, and that is very much driven by Surveillance and Dynamics, which increased their share of the total sales revenues in the quarter.

In addition, we significantly increased the R&D, which is according to our strategy. And we are, at the same time, leveraging and scaling on administration and marketing and sales costs. And all in all, we are improving our EBIT margin to 11%, an increase of 41% in the quarter.

Turning to our business areas, and let's start with Dynamics, where we have -- the ramping up is done successfully, and we have had several deliveries in the quarter, which has contributed to the EBIT, which is an EBIT that is at record numbers this quarter.

The sales and EBIT growth in Dynamics is broad across the business units. So very good performance from Dynamics. The same goes for Surveillance, where we have the EBIT growth of 55% in the quarter. Here, it is very much the sensor systems business that is supporting both the growth and the EBIT margin expansion.

And like Dynamics, Surveillance is ramping up, and that is something that we see in the G1X production, which is ramping up and contributing to several deliveries and the EBIT margin increase in the quarter.

In Aeronautics, it's the Gripen business that is expanding the production capacity with delivery levels that are increasing. And as we have mentioned before, we still have negative contribution from the T-7 program, which is something that we will have for some more time until we have ramped up and have scale in that production facility.

Finally, our business area, Naval. The highlight for Naval this quarter is, of course, this huge contract for the 3 submarines to Poland, a large order of SEK 47 billion that will contribute to sales and revenues for a long time and several years ahead.

On the other hand, we were not selected to -- for the Swedish frigate program. And as Micael said, we have recognized costs for that, that was related to that program that we have taken now in this quarter, and that is what's impacting the EBIT and EBIT margin negatively in business area Naval this year.

So all in all, we have delivered strong EBIT across the group. Importantly to mention is that we have achieved that while we, at the same time, are making significant investments for R&D in future growth, innovation and technology leadership.

On a rolling 12-month basis, we have spent SEK 4.4 billion in internally funded R&D. This is more than doubled since 3 years ago. Our R&D is focused on key technology areas, including autonomy, next-generation sensor capabilities, advanced weapon systems and AI-enabled command and control systems, all of which are supporting the future growth.

These efforts are generating fast results and some examples during the quarter are, for instance, that we did a first test flight for an unmanned airborne early warning system together with General Atomics. We also performed a successful remote torpedo firing from an unmanned and remotely controlled Combat Boat 90. These are just some examples on new capabilities that will reinforce our ability to -- for future opportunities, but we're also going to strengthen our existing platforms.

Now let's take a look at cash flow. Looking at the first half year, we have a positive cash flow of SEK 1 billion, which is a significant improvement from last year. And that is coming from -- while we, at the same time, are increasing our investment in capacity that is increased by around SEK 1 billion compared to last year.

The higher cash outflow from financial items and taxes is mainly related to the higher taxes that were paid in Q1. So with support from the recent major wins, we see good prospects for good cash flow from -- for the rest of the year. And as Micael also mentioned, we have not yet received the advanced payment for the Poland contract. So we remain confident to deliver continued positive cash flow during the year.

Notably as well is that we are improving our return on capital employed, and that is driven both by higher profitability and also higher capital turnover. Our balance sheet is strong with a net liquidity of SEK 2.5 billion. It's a decrease since year-end, and that is primarily from tax and the dividend payments per done.

We have a cash and liquid investments of approximately SEK 17 billion and in addition to that, an unutilized revolving credit. Also worth mentioning is that S&P has made their annual review in June, and they reconfirm our investment-grade rating of BBB+.

So overall, this provides a strong financial position and flexibility going forward. So all in all, we remain confident in our medium-term targets. They are supported by strong market demand and increasing defense spending, and our portfolio is well aligned with customer requirements, and we continue to invest heavily in production capability, technology and talent, both to support future growth and to make sure that we can deliver on our commitments.

These investments are increasingly translating into higher delivery volumes and improved scalability across the company. So against this backdrop, we are well positioned to reach our medium-term targets of organic sales growth in this period '23 to '27 of around 22% CAGR.

We have an EBIT growth higher than the sales growth and a cash conversion above 60%. So we see that the combination of the record backlog, the strong demand, the capacity expansion, the disciplined execution and is a solid foundation for achieving these targets.

So with that, I hand over to Johan and the Q&A. Thank you.

Thank you, Micael and Anna. And let's move over then to the Q&A session. And I think we have a couple of questions over the telephone that we can start with and also remind you that you can post your questions over the web interface as well, if you would like that. So please, operator, do we have any questions over the telephone conference?

Yes. We will now begin the question-and-answer session. [Operator Instructions] The first question comes from the line of Daniel Djurberg from Handelsbanken.

Congratulations on solid operations Q2 and all new orders. I have a couple of questions, if I may. Can you hear me?

Yes, absolutely. Go ahead.

Yes. First, I would like to ask you a little bit on the group gross margin. It was strong given the mix. And -- but I was thinking if we would have more of an unchanged mix and also the underlying gross margin would have been in that scenario? And also if you can comment on impact on component inflation so far and what to come.

Do you want to talk about the gross margin on group level?

Yes, I can do that. I mean, as you can see, the gross margin has improved in this quarter, it was really driven by Dynamics and Surveillance. The gross margin is increasing while we're scaling the company, but of course, it's impacted by the mix from the different business areas.

So -- but as we know, the contracts that we are receiving now for the platform contracts are going to be delivered for over a long-term period. So we still see that the gross margin is expanding.

I must say it's a bit difficult to predict exactly how the mix will look like because even though the big platform contracts are a bit more stretched when it comes to deliveries over time, they also -- those operational business areas are a bit different when it comes to the gross margins, but still delivering sort of the bottom line margin needed.

So exactly how the mix of products, which has higher gross margins than maybe the platform margins will look like going forward. It's hard to say actually. It depends on the slide I showed with how much of the backlog is actually related to short-term deliveries and the longer-term deliveries. But all in all, I mean, bottom line margin will be good in the mix.

The other question was related to components, I guess. And I mean, we're not a huge buyer of components because -- but of course, we pay attention to the fact that we don't have sort of limitations on access to components yet, but the prices are increasing due to data centers and GPUs and what have you, of course.

But we're not a huge volume buyer. So it has not a big, big effect, but some, of course, but we try to mitigate that through other means. So we're not sort of suffering like maybe the automotive industry and maybe the telecom industry in the way that they are doing yet at least.

And may I have one follow-up, and that would be if I missed something on -- you talked about advanced payments for the Poland contracts. And have you been more vocal on which portions of these will come and when and how much or anything like that or...

We're not sort of specifically talking about the percentage of the contract or anything like that. But it's a good advanced payment and a payment schedule that supports our quick ramp-up of shipyard capacity and all that. So we're not going to act like a bank related to that contract, that much I can say.

Thanks so much. And operator, we have a next question.

The next question comes from the line of Ian Douglas-Pennant from UBS.

It's Ian Douglas-Pennant at UBS. So the first is on the Naval write-down. Could you give some quick kind of indication on the size of the write-down that you took and what exactly was written down? Is it capitalized R&D or inventory? Or how should we think about that?

The second on Surveillance, you mentioned that mix effect was a supporter of the margin expansion there. I wonder if you can help us size the relative drivers of margin expansion is really what I'm trying to get at is how important is the underlying efforts that you're making to improve margins there?

And thirdly, can you give us just a reminder on where you are in terms of production capacity in Dynamics, the plans to expand those and the kind of timing of when the new capacity comes on?

Well, on the Naval side, I mean, obviously, that was a pre-start to actually concepting and making sure that we can manage the time schedule. As you heard a lot about the selection was about the schedule, and we were confident in managing the schedule for delivery, but that sort of led to that we did have to do a pre-start on the project.

And it was roughly SEK 200 million that we took on Naval side. So it's as easy as that. But there are other good things happening mitigating things going forward. So I'm not worried about that. But that was, of course, a bit of a disappointment.

The underlying margin on...

Surveillance.

Surveillance.

The mix how that...

Well, I think Surveillance, as you're saying, as you're alluding to, I mean, the underlying margin on Surveillance is a combination of the big platforms and also, of course, the scale of delivering sensor capability. And -- but I wouldn't say that margin should be good all in all in combination because I will go -- I won't go so far to say that now the margin on the big platforms like GlobalEye would be sort of limited.

On the contrary, really good margins. But of course, on the product side, if you really get to delivering 300 radars a year, you will get a huge scale effect. So when that demand continues, that would add a little bit more margin to it than the GlobalEye. But Surveillance should be sort of showing numbers that we are looking at right now and also going forward. That's what I can say on that. And the third one was..

The third question was a little bit about in Dynamics, where are we in terms of the ramp-up.

No, I think we have now a completely automated weapons factory, the weapon itself, sort of the tube, if I would call it that, up and running in Linköping. We're automating the ammunition manufacturing in Karlskoga that starts coming into play as well.

We have put in robotics in the existing line, but we're doing a parallel investment to do it fully automatic, if I put it that way. We will inaugurate the facility, the manufacturing facility in Grayling, Michigan in October time frame. And early next year, we will do the same in India for that manufacturing facility also. So a number of capacity increases are happening as we speak and more and more every quarter comes into play. So it's going really well, I must say.

Excellent. And let's take a question from the web interface in between, and it's around the capacity as well. For GlobalEye, now when you have started to get so many contracts, how do you view the capacity? Or what are we ramping up to? And how do you see that? It comes from Oxcap, Rory Smith.

Well, I mean, if you have asked me like 1 or 2 quarters ago, I would have probably said that we need to ramp up to 4 a year. Now I think we have to actually take it a bit further to 6 per year. And all the things we're doing right now in terms of increasing our capacity in Linköping to do the conversion of a business jet to a missionized GlobalEye is going really well.

But we will also create a hub in Canada since we are selected in Canada and maybe at another location in Europe going forward to support sort of the NATO and the Canada thing, but there is maybe also more in pipeline. So I would rather say that we go from 2 a year now and should aim for like 6 a year in the 2030 time frame.

Okay. Good. Another question over the web interface. When you are starting to get more international orders now for the larger platforms and you're adding more orders and you're ramping up the delivery. Are those international orders typically coming with a high margin? Or how should we view that?

Depends on the country and the contract, I would say. It's of course, we always try to have good margins in our contracts, and that goes for every contract. We have a few legacy contracts that are not sort of fantastic because of events that happened over time and also maybe how we contracted them legacy-wise, but we're doing a lot better when it comes to each and every contract, I would say now, which also adds, of course, to our development when it comes to profitability and our ability to invest in R&D.

Maybe I can add just to that as well. I mean, also some of the international contracts come with an open book contract policy, which is normally a bit lower margin. So it's -- as you say, it's a mix and depending on which kind of contract.

If you are sort of selected as a supplier for a certain capability in a country, that's a framework contract that has an open book, as Anna is saying. And then, of course, that puts a bit more pressure when it's not in competition anymore. It's a complete open book. So that -- the mix between those contracts and also how many we win in competition will also sort of create sort of the margin development.

Good. Okay. Please, operator, do we have any other questions on the telephone conference?

We now have a question from the line of Mikael Laséen from DNB Carnegie.

I have a question on the guidance, midterm targets. This quarter, you grew 30% organically and the order intake reached SEK 68 billion, and you also got several new orders after quarter end. But you left the medium-term sales guidance unchanged. I'm just wondering if this is a reflection of execution capacity or delivery timing or just conservatism?

I would say that -- I mean, you're right. I mean, we have delivered 26-plus percent organically during the first half year this year also. So we're moving in the right direction. But there are still 6 quarters to go in our '23 to '27 time frame guidance period.

And we've said that 6 quarters a lot of deliveries and things that must happen and really get sort of in place. So I still stick with my comments that, yes, we're on the right track, and we will come back sort of towards the year-end on how we will look at the future guidance thing.

I want to sort of just -- I don't want to jump into a new guidance sort of discussion now. I think it's fair to sort of give it another 2 quarters before we look upon where we're going. But of course, it's going to be continuous growth. I mean, we're confident in the guidance we have today. But that's where we are.

Yes. Okay. Fair enough. And when it comes to bottlenecks or potential bottlenecks, this quarter doesn't suggest any issues. But if you look across Saab today, what is the single biggest sort of bottleneck to grow even faster, production facilities, skilled engineers, suppliers, customer acceptance or something else?

The biggest effort, I mean, we put a lot of effort in increasing our own capacity, spending like SEK 10 billion a year on it roughly. That is important, but that is not enough. We have to work with our supply chain to make sure that, that becomes more resilient.

It's everything from putting a little bit more in stock like titanium and aluminum alloys and special steel and some components and also looking at maybe trying to certify an alternative supplier, of course, to have redundancy, but also to in-source a few things to do it ourselves. So all of these things are in play. And that's sort of the bottleneck to manage your supply chain, I would say. This is something we have to continue to work with. It will be a never-ending story, I think but that's where I see we put most efforts today.

We've been doing these things really well, but we have to continue being on our toes working that. So if I need to point to the bottleneck is probably more in the supply chain than anywhere else. Not in the recruitment, we are attracting lots of skillful people, fantastic employees on a rate of 3,000 a year net up roughly. So that's not the real limitation really, but rather the bottlenecks is connected to supply chain.

Okay. Another thing regarding capacity and the new large orders. Can you say something about how you plan to, I mean, deliver the big Polish contract, if that means higher investments that we should maybe build into our expectations or something else, how that project is expected to develop and start?

Of course, it will take some sort of investments and industrial collaboration setups and investing a few things in a shipyard in Poland, which we will build up. But we have covered that in our contracts. So it's not sort of a thing that we put aside of the contracts, no. So it's not sort of a thing like that. So I'm confident that we -- by the contracts we have on the Naval side now can cover that sort of investment we need to do.

Operator, do we have another question over the telephone conference?

The next question comes from the line of Jakob Marken from SEB.

Just a follow-up on the GlobalEye you touched upon on the 6 across the year. I mean, firstly, what kind of investment do you think you need to reach that number?

And secondly, I mean, we know the France order and we expect NATO and Canada, of course. But I mean, if you see beyond that, what's the reasonable sort of order from a normal sized country? I mean, how many orders or countries are you expecting orders from if having a production capacity at 6 planes a year?

Well, I think it's hard to sort of break this down into really specific things. But I mean, our assessment of the potential pipeline, including NATO and Canada, of course, and a couple of others that we have in the pipeline is substantial. And if we want to keep our lead times and the deliveries needed in the 2030 time frame and onwards, I think we need to be somewhere between 4 and 6.

And I should rather sort of build for 6 because it's not that sort of complicated if you need to adjust it a bit downwards. It's not huge investments in terms of infrastructure that we're talking about, honestly. So it can be done, but also in partnership with a couple of countries, we can build that capacity.

But of course, you can calculate that the business case is substantial on the GlobalEye. And we want to capture that market. But I won't go into saying specific numbers on it, but I'm confident that we can now go a bit further than the 4 per year that we talked about earlier.

Perfect. That's very helpful. Just a short question, a more technical one. So corporate costs very low here in the quarter as well as in Q1. I mean, should we expect corporate costs to be structurally lower? Or can you comment anything about that?

Do you want me to take that? I think what you can say is as a guidance, you can look at the corporate costs that should be in line with how we reported them last year. So it was a little bit lower this quarter, again, impacted by both more profitable business in the scalable business and also lower cost for our incentive program, share matching plans.

Thank you very much. I think we have a final question here on the web interface, and it's related to -- that you have made a number of investments in AI companies, Helsing and some other stakes that you have. What are you getting in return for these? And how do you view them long term?

Well, it's not sort of an equity investment in itself, that is not an important part, so to say, to have a share like 5% or 10% in an AI company is maybe sort of not what we're looking at. So it's not a financial investment, but of course, that can be good as well. But it's more like a connected to a partnership with a company to create a shortcut of skillful people that can add both AI stacks to our platforms and applications in a speedier way than if we build them ourselves.

So that's the key really to get sort of a shortcut into something where they already built something that fits really well with our command and control systems or with our AI agents that we need to use in our platforms. So that's sort of the reason. And there are sort of a number of them that's really good in Europe today.

Good. Thank you. Operator, do we have any final questions on the telephone conference?

Yes. We have a question from the line of Henric Hintze from ABG.

This is Henric at ABG. So just a quick question on Dynamics from me. So Q2 was a pretty strong quarter for sales there. I was just wondering if you could give us any detail on the phasing of deliveries in Dynamics this year. You previously sometimes commented if it's been a bit higher or lower in a specific quarter.

Well, again, I think you have to look upon Dynamics is not on a specific quarter because deliveries are related to, of course, deliveries. Then you recognize revenue when you actually deliver. And that's a bit batch like happening now and then. Of course, there are many deliveries to do. They have a huge backlog.

And the demand in the market is still extensive. So that's also different in different quarters. So they are definitely moving in the right direction. And margins are really good, almost still 20%, which is higher than the midterm -- mid-double-digit margins that I've talked about, but they're doing really well right now.

So it fluctuates a bit between quarters, but there's nothing sort of new in the trend that we can see or want to highlight related to Dynamics. I'm really confident with that business area. And there are -- I mean, that's where we have lots of capacity investments coming more and more into play as well, which adds to the capability of deliveries.

Yes. I mean, I guess that's sort of what I'm getting at. Would you say that the Q2 figure was maybe a bit stronger because of some certain deliveries? Or is it more a result of capacity coming online that you see this strong Q2 figure?

I wouldn't regard it as -- if you look at orders, I mean, even though if you look at the half year, it's like SEK 5 billion less than sort of the comparable half year last year, that doesn't worry me at all because I know the pipeline and sort of timing on contracting. The deliveries are -- they're doing well. They can continue in this direction. Of course, they can.

But exactly, I don't want to detail exactly when each and every one deliveries are. But I wouldn't look at the quarter as especially fantastic when it comes to sort of the growth either. They have a lot in the backlog, SEK 80 billion plus. So there are lots of deliveries. So they should do numbers like this.

The only thing maybe to add on that is normal for Q3, we have the vacancy period, and that goes for everyone. But with delivery projects as we have in Dynamics, they are often impacted by the vacancy period. But...

Yes, that could happen in Q3. But then in Q3, I will say this is like a Q3 and then there are normally a Q4 that is extremely good for Dynamics, as you know. So that's how it varies between the quarters. I look more like on a yearly more long-term basis.

A quick one here from the web. You talked a lot about GlobalEye and the ramp-up there. Where are we in terms of Gripen? And how do you see that also with new contract coming in here?

Also ramping up. I mean, I would say we are aiming for somewhere between 25 and 30 aircraft a year. And that's sort of doubling almost the capacity that where we are right now. So we're moving quickly in that direction. confident with the investments we're doing to manage that. So that's also important, absolutely.

Excellent. And operator, I think we have time for a final question for -- from the telephone conference. Do you have any final one from there?

Yes. We have a follow-up question from the line of Daniel Djurberg from Handelsbanken.

I would like to know a little bit more about the unmanned airborne early warning system that you tried out with General Atomics in the quarter. What you can tell us about potential market launches or when this could hit the market?

We are test-flying it as we speak, and -- but we are pushing hard to get it into the market, of course. And it is for sale already. So that's obviously the case. And then it's a complementary capability to a GlobalEye capability, I would say. So it's not exactly the same, but it's a great Surveillance capability. So we're getting there quickly.

And then, of course, it's -- if you look upon it from a buyer's perspective, MQ-9B as a platform is quite attractive in the marketplace and then to have different capabilities integrated to it is, of course, something we will benefit from having our sort of airborne early warning pods to attach to it. So I look forward to see that being coming into the market. But it's not really, really there yet. We are still working test flights, but we are sort of prepared to start talking contracts with people.

Excellent. Okay. So I think from that, we will end the Q&A session and also the presentation for today. So we thank everyone for listening in and joining. And please reach out to the Investor Relations team if you have any other follow-ups or any other comments on the report. So thank you very much.

Thank you.

Thank you.

Good morning, everyone, and welcome to the presentation for Saab's report for the first quarter of 2026. My name is Johan Andersson, responsible for the Investor Relations, and I will be the moderator here today. Here in Stockholm, I have our CEO, Micael Johansson and our CFO, Anna Wijkander. Micael and Anna will present the report, and thereafter, we will have a Q&A session.

And I remind you that you can both ask your questions over the telephone conference or you can write your question in the web interface and I will read it out here in Stockholm. So with that, warm welcome, and I'll hand over to you, Micael.

Thank you, Johan. And also from my side, most warm welcome to this quarter 1 report. Let's jump right into some highlights. I think we can conclude that we have started this year in a very strong way, substantial organic growth, 23.6% and also creating scale gives us a good profitability. Good cash flow and still very intensive in the market. The momentum is very high in the market. So we have many avenues. And the order intake, as you've seen, is on par with the quarter 1 last year. So a strong quarter.

A couple of sort of examples of important things that happened, and I will come back to deliveries and stuff like that. But the contract from Sweden on the Counter-UAS system called Gute is very important. We have created an agnostic sort of very flexible Counter-UAS system, and that I will get a little bit into that later.

A very big event that happened this quarter is, of course, the delivery of the first Gripen E from the Brazilian facilities, the factories in Gaviao Peixoto, which got lots of interest from the Brazilian side, and they are really proud of having this sovereign capability now in country. And it's good for us as well, having a hub so we can ramp up the capacity, of course, in terms of Gripen deliveries.

We also see that looking at the growth that our investments in production capacity comes into play. We have still lots to do on that side, but we have now a couple of production lines that have opened in Sweden to support the Dynamics business specifically. And that's very important to us since we have a substantial backlog, as you know. And then, of course, the restructuring that we've done 1st of April of creating a new business area called Naval, including now Naval Combat Systems together with the former Saab Kockums business is a very important step to establish a whole offer in the market when it comes to combat system integration, design capability of surface ships, but also creating the systems of systems capabilities, unmanned teaming on the Naval side.

More specifically on the numbers, as I said, the order intake and the momentum is good. We increased the medium-sized orders with 28%, almost a book-to-bill of [ 1.95 ]. And of course, a certain quarter, you can't sort of look at specific sort of order intake volume since we have digital large contracts being negotiated. You never know when they actually will happen in which quarter, but this is good from a foundation perspective, small- and medium-sized orders. And the growth was excellent organically, SEK 19.2 billion, growth in all business areas, double-digit numbers.

And specifically, Surveillance had a very good quarter in terms of growth. Also, the EBIT growth is 32%, SEK 1.9 billion in numbers. And that is, of course, an effect of the increased top line, creating scale effects and giving us a 10% margin, which is excellent. And also a good quarter when it comes to the first quarter, looking at the cash flow -- operational cash flow of SEK 1 billion, which is about, of course, deliveries and payments from the customers. And that is, of course, something that we always look into diligently that we -- and we've guided to positive cash flow also going forward, of course. So that's where we are after the first quarter.

And then I'll give you a few comments on each business area. And the growth in Aeronautics is, of course, much from the Gripen programme, where we have lots of intensity and also deliveries ramping up. And then we had this fantastic event in Brazil now. So we have 2 factories that can actually deliver Gripen aircraft. And that will also, of course, be a good relationship increase between Brazil and Sweden when it comes to the further development of the Gripen E, which is -- the aircraft is incrementally possible to develop through software and so forth. So it's not only about production.

Then we have a couple of contracts on the T-7, the Lot 3 and 4 of the T-7, which increased the backlog, of course, but we still have a burden of the -- sort of the burden of not having the production and ramping up quickly enough. And as I've said before, this will take a couple of years before we actually get to the right numbers, but many hundreds of aircraft are in play for this. And in the end, there will be probably a couple of thousand aircraft. So this will be a good program, but it's a bit of a fight to get this fantastic facility delivering more aircraft out of the facility, but they are delivering now at least. And then, of course, we've launched the Gripen Colombian programme, which is very important to us, which we did win then in December last year.

Dynamics, excellent demand in the market, 1.2 (sic) [ 1.2x ] book-to-bill. So good order intake and good growth as well and a mix of combat -- Ground Combat orders and Missile Systems orders. But remember, the Dynamics is support weapons, it's missiles, it's training and simulation, it's also camouflage nets, signature management, which is a good mix of things. So all the parts in Dynamics are doing really well. And deliveries are important. And here, we have the production facilities, a couple of them in Sweden sort of now up and running in the Karlskoga area, which is really good to us.

And also, I must say that the profitability is, of course, excellent in the quarter as well, which Anna will go into more detail about later.

Surveillance, very strong demand in the market across the whole portfolio. We have a pipeline of discussions on the GlobalEye with different countries, and I think that has potential going forward and also, of course, the ramp-up on the sensor side. And I want to highlight specifically the Giraffe 1X, where we talked about that we actually manufacture these sensor systems on a bit of speculation rather than only on contracts, and that's good for us because we've been able to deliver a number of systems to the Middle East countries that needs to find and detect all the missiles and the drones coming in over the territory. So that's good for us, and we will now aim for ramping up that production to over 300 a year. So that's a good sort of volume business on the sensor side.

And then, of course, this Counter-UAS system that Sweden contracted us with is a big initial contract and important one, which will -- I think that area will develop into also not only being military applications, but also protecting critical infrastructure in the total defense perspective going forward. And as you can see, the growth in Surveillance was excellent, over 30%.

And a couple of comments then. This is actually the Counter-UAS system is a very modular system in terms of the vehicles, the sensors to command and control, and also then agnostic when it comes to which actually effectors you use. But it is a sensor to shooter system, which we put together in a very short time since we had the different products and components of it and integrated it to be operational extremely quickly. And that is the key. We can do this with existing things that we have to provide things that will make a change in the deterrence and the defense very quickly.

And we continue then to adapt different type of effectors going forward, either it's the 40-millimeter from Bofors -- from BAE Bofors or whether it's the Trackfire with a 30-millimeter cannon or whether it will be the Nimbrix going forward. So this is important to be flexible on the effector side, and it's proven very effective.

When it come to Saab Kockums, which will be the last time I say Saab Kockums because this now will be a new business area named Naval going forward, but this is the last quarter we reported like this. And they also had good growth. And we are, of course, in intensive discussions with Poland on the submarine programme, and we hope to finalize that, of course, in the next quarter, but I can't promise exactly when, but it's intensive discussions and according to plan.

Also on the Polish side, there was a new -- the next SIGINT ship was launched in January, a very important programme to us, of course, and also good security politics collaboration thing between Sweden and Poland. And then we have now a more consolidated business area going forward, offering a combination of Naval capabilities and also being able to do the combat system integration between all the components in the same area and offering that in a different way, which I think will be very good for the business going forward.

Combitech is also doing really well. Good order momentum. And of course, it is the total defense perspective and how much we have to do in terms of creating better deterrents and processes in different parts of the Swedish society that drives growth, but also the military side and the contracts we get from the Defense Material Administration. So this is excellent performance, growth of 16% with good profitability. And of course, it's all about getting sort of the competence and the skills in the organization growing, which has gone really well to grow this business. So I'm really pleased with this.

On the sustainability side, a couple of important things happened, of course, during the quarter as well. We have done now compliance sustainability statement report in our year-end report and the annual report, I mean, for '25, completely in compliance with the requirements then the CRSD (sic) [ CSRD ] requirements, and that has all the details about the metrics, the targets and what have you -- if you want to dive into that.

And then we've looked into a Life Cycle Assessment when it comes to our Giraffe 1X because I mean, okay, we can have control over the Scope 2 and -- 1 and 2, but Scope 3 is also very important, how you use the system. And we have concluded and we are in discussions with the end users that if they do go from supporting the system from a diesel sort of fuel perspective or going to electrical power or a biofuel type of setup, you would sort of gain a lot when it comes to the emissions, of course, and that is what we are pushing now. And this system can be connected to any normal 220-volt sort of outlet. So it's really flexible in that side. So we've done something that is prepared to do a big effect on sustainability if the end customers choose to use it that way.

And then, of course, we're looking into how we -- when we get volumes in production like in Dynamics, of course, how we use the packaging and how we reuse materials for that and not sort of wasting that adds lots of savings on the emissions, but also cost, of course, for us. So we're changing that. If you look at the quarter sort of emission perspective, we have an increase due to more flight tests compared to the last quarter last year.

And we have more business travel also because of the intensity in the market, but it's also a period of cold temperatures. So looking at all the sites, of course, when a new site comes into play, you get a slightly higher footprint. But we are on the right track towards our targets. We are 36% down when it comes to the reference year 2020, when it comes to emissions towards our targets. So we're doing well on that side.

So with that, I will hand over to the details, and Anna will walk you through a little bit more of the financial results.

Thank you, Micael, and good morning from my side as well. It is clear that we have started the year with a strong first quarter, and I will soon go into the details of the financials, but before doing that, I think it's good to look at some trends and what we have achieved so far.

So over the recent years, we have achieved strong sales growth, and that is supported by our leading offering and the trust from our customers. And consistent with our profitable growth strategy, we have scaled our operations, we have expanded our capacity, and we have continued to deliver on our customer commitments. On top of this, we also have a healthy backlog that -- and we are continuously working on efficiency, which will support our performance going forward.

So looking at how the trend has developed after this first quarter 2026, we have now delivered an organic sales CAGR of 24% so far in our medium-term target period. And importantly to note here is that we have had double-digit sales growth in all our business areas. We have also continued to deliver profitable growth, and that is shown that we are driving our operating cost leverage and our EBIT growth is more than our sales growth. So it's now 33% for this period. And to note here, it's also important to say that we have increased our spendings in R&D to be able to be relevant to have future capabilities in our portfolio. So with that, we are progressing well towards our medium-term targets.

With that then, now let's take a closer look at the quarter. The EBIT increased by 32%, largely driven by the sales growth and leverage on operating expenses. We can see that marketing expenses are flat compared to last year and the administrative expenses are slightly lower, and we continue to ramp up the R&D efforts as planned. So all in all, we have an operating margin of 10% compared to 9.2% last year.

Aeronautics. Here, we had good sales growth of around 16%. However, we can see that the margins decline, and that is due to somewhat increased R&D amortization and we also had a negative currency effect impacting. Also, as Micael said, the T-7 programme has still challenged with profitability and ramp-up, but we have good order intake here in the quarter, but that is impacting the EBIT margin negative in Aeronautics.

In Dynamics, we continue to expand capacity and to deliver on our backlog, and we have a favorable mix this quarter together with the sales growth, and that drives the EBIT growth to 38% growth this quarter and an EBIT margin of 17.5%. As always, when we talk about Dynamics, it's important to remember that the EBIT margin varies between the quarter depending on mix and what deliveries we have.

Surveillance also had a very strong quarter with good progress across all business. And one good example of that where we had particularly good performance was in the surface sensor area with several deliveries. So overall, sales grew by 32% and the EBIT grew 52%, and that is driven by the mix and also the leverage in operating costs.

And Kockums also growing. But here, we can see an impact of the high activities that we have in the marketing area with the campaigns ongoing, for instance, in Poland. So here, the marketing cost has increased compared year-over-year. So that is why we have a small decline in the EBIT this quarter.

Not visible here in the slide, but worth mentioning is also Combitech that has also a good development and high activity through their increased number of consultants, and they have an operating margin of 11.3% this quarter. And also within corporate, we have improvements compared to last year in our small Skeldar business and also in the minority portfolio, which improves the margin in corporate.

As you already know, we have established a new business area from 1st of April, the business area Naval. The purpose is to consolidate and to strengthen our total Naval offerings to deliver greater value to our customers. And from the second quarter, Q2, we will report financially in this new structure. And you find more details on our website, and you can also find the restated financials to facilitate your comparison.

The key change is that we have moved or transferred the business unit Naval Combat Systems from Surveillance into this business area Naval. It's largely a system integration business driven by projects. And historically, they have had around SEK 6 billion per year in sales. And since 2024, they have, in average, had an operating margin of 6%. When you look into the details, you will notice that there are 2 quarters in 2025 with significantly lower margins in this business unit. And this is due to the nature of this business where we have this project mix depending on how the margin is every quarter and also that we had some margin adjustments in a few projects within Naval Combat Systems. But looking ahead, this is a business with future growth, and we see potential for profitability over time. But more details are shown in our homepage.

Next slide is the income statement for the quarter. And the organic growth was 23.6% reported was 21.4%. Same here this quarter as last quarter, the currency impacting us negatively with 2% (sic) [ 0.2% ] point on the sales growth. Gross income is increasing, but margin is flat, and that is due to mix. But if we look at the business areas, we can see that they are improving year-over-year in gross margin.

Let's then -- I talked about the EBIT that has improved, but let's then turn to the financial net. Here, we have a difference since last year because we are now increased the application of hedge accounting to also include derivatives that hedge currency in the tender portfolio. So from now on, you will see currency gains and losses from the tender portfolio in the other comprehensive income and not in the financial net. So with that, we will have less fluctuation in the financial net going forward. Important to note here is that we have not changed our hedging principles. It's just that we have changed the application of how we use hedge accounting. Finally, we have growth in our EPS driven by the EBIT growth and also the net income is growing this quarter.

Turning into cash flow. We had a strong cash flow from operation of SEK 2.8 billion this quarter. Main contribution came from Surveillance and Dynamics. And the largest reason for that is several customer payments, but a bit offset by inventory buildup, and that is also what's impacting the change in working capital. The investments increased compared to last year, which is totally according to our plan, and they were up from SEK 1.6 billion to SEK 2 billion this year. And we now have an operational cash flow of SEK 1 billion after this quarter. The free cash flow is impacted by higher tax -- we have higher supplementary tax related to income taxes paid for 2025. So that's the main reason why that is negative SEK 1.3 billion and the free cash flow slightly negative of minus SEK 300 million.

All in all, we have an improvement also in return on capital employed, driven by our improved profitability, but also on our improved capital turnover. So it's now above 16%. And the cash conversion is 53% after this quarter. So progressing well towards our medium-term target to have a cash conversion above 60%. The net liquidity position and balance sheet is still strong. We have a net liquidity of SEK 4 billion, almost unchanged since last quarter. Cash and liquid investments amounted to SEK 18.1 billion. And in addition, we have an unutilized revolving credit facility of SEK 6 billion.

Let's turn to the future and our order backlog. Over time, we have built a solid order backlog, which is currently SEK 274 billion. And this, of course, positions us for a good position for long-term growth. Compared to last year, we are in a better position and have strengthened the backlog for all years ahead. In particular, for the remaining 9 months here, the backlog has increased 28% compared to where we were last year. And for next year, it has increased by 56% compared to last year.

Also to note in the backlog is that we have a good balance between our business areas. Aeronautics has now increased their share. So they are around 30% and then it's Dynamics and Surveillance, which add up to most of the backlog. And the international orders is around 72% of this backlog. So all in all, this underpins a good position to support for future growth going forward.

And then finally, before ending my presentation, let's just remind us about our medium-term targets. We are going to deliver around 22% sales CAGR for the period '23 to '27. We will have an EBIT growth that is higher than organic sales growth and the cash conversion of more than 60% during this period.

So thank you very much. And with that, I hand over to you, Johan, to open up the Q&A.

Thank you very much, Anna and Micael. So let's open up and start the Q&A session. And please, operator, do we have any questions over the telephone conference?

[Operator Instructions] The first question comes from the line of Yassin Moktadir, UBS.

So firstly, could I start with Aeronautics. So you cited several ongoing Gripen campaigns. Could you talk us through those and your confidence around winning potential orders there? And then within Surveillance on GlobalEye, you also mentioned some discussions that you're having and have been seeing kind of increasing press releases or articles around the E-3 replacement. Is there any further developments there too?

Okay. Thank you for that question. On the Gripen side, of course, I mentioned we're still in discussions with Canada, which is, of course, about the decision on sovereignty in the Canadian industry and how we would do a tech transfer and setting up a hub and all that, but it would also mean sort of a potential contract with Canada. Hard to say exactly when that sort of decision will be taken. It's an evaluation ongoing, as you know, and it's probably on Prime Minister level to sort of go either way. So it's hard to predict, but it's intensive. We have discussions all the time with them.

Then, of course, since we had the President Zelenskyy in Sweden last year, agreeing with Ulf Kristersson that they will go for the Gripen. We are in discussions with Ukraine to move that forward. Those are two potential big ones, of course. But to say exactly sort of confidence level and exactly when that can happen is difficult, of course. It's always political, but we're moving ahead on those two. There is an interest from Portugal and some other sort of earlier campaigns, but -- so there is an interest. We have a ramp-up of capacity ongoing. We're going to deliver more aircraft, many more to both Sweden and Brazil and then Colombia and Thailand. So lots of intensity in that area.

On the GlobalEye side, you know that France contracted us last year. There is an option for another two in that contract that we're discussing. And of course, we are -- we have given information to NATO connected to the IFSC programme. Let's see what happens there. That's an opportunity, of course. And then there's an interest from Germany, from Poland. So there's a pipeline of opportunities in different stages, of course. But I must -- I would say it's a big interest for both platforms right now.

Please operator, do we have the next question?

The next question comes from the line of Bjorn Enarson, Danske Bank.

But first of all, on -- you touched upon corporate and other items there. I mean you have a solid result overall, but I'd like to argue that a quite big deviation was within corporate. Can you talk a little bit about that and how we should think about that going forward? And also Dynamics had a good quarter in terms of deliveries, obviously good for profitability. Can you talk a little bit about how the profile for Dynamics looks for the year?

Do you want me to start with the corporate question? I mean in corporate, there we have different costs that can vary between quarters, so we have some periodization impact. Cost that comes here is could also be shareholding programme, which, of course, nothing that we can predict where the share price is going. And then also cost for IT and security that has more coming up later during the year that we had last year. So I think when you look into the corporate, a good rule of thumb could be to look at the level where we were last year.

For the full year?

For the full year. Yes.

Okay. On the Dynamics side, I mean, they have a huge backlog, of course. And it's a good sign that they have now good deliveries and investment, as I said, in capacity is coming into play, which is really important to us. There's a good foundation for deliveries going forward. But I would -- sort of I've said before that they will grow, but we'll not guide on that level, so to say, on the business area level.

And we've said that sort of mid-double-digit numbers is still depending on the mix of things within Dynamics, which contracts, the mix of missile support weapons, training and signature management that defines sort of a couple of percentage up and down in each quarter, so to say. But we had a good mix this quarter, but they should be really profitable, which they are. So that's as much as I can say. Better and better foundation for deliveries though on volume side.

Again one last question on the order that you touched upon received in early April C-UAS, super interesting. Can you talk a little bit about the market potential, number of units or countries or anything you touched upon that it has a good export potential?

I think Counter-UAS, if you're having sort of efficient and cost-efficient systems, especially on the effective side and that you can actually be a bit agile when it comes to which one you use, you will have a good market opportunity. Everyone is asking for this kind of systems. So I think there will be good potential. I don't want to go into numbers, but it's, of course, an export potential. But also in the total defense perspective, you have to have systems protecting critical infrastructure. And that is more of a governance problem, I would say, because it's not that the defense forces can protect every critical infrastructure in a country. It's more about how the country is structured.

So there will be quicker sort of, I would say, more expedited contracts in certain countries doing that, and it will be a bit slower because of regulations in other countries, but extremely good potential on this system. We have a very cost-efficient sensor, an excellent command and control, a low footprint and now we're having different versions of effectors. And I look forward to when Nimbrix come into play because that will be an important reasonably long-range capability with good cost level. So there's more to do here and good potential, absolutely.

And I think, public [indiscernible].

Sorry, go ahead if you had a...

No, it was just a quick one on -- when [indiscernible] in the public sayings are on when this is going to be operational in Sweden? A quick ramp-up or is it...

Yes. I mean a version of it is already operational from the Air Force perspective. The deliveries on this one will be in the next year time frame, roughly.

Thank you very much, Bjorn. And let's take two questions from the web interface here. One was on -- from an order intake and growth side, do you see any challenges in the market? Anything that hampers you when you look at market demand?

I would say no, not really. I see the demand is still high there. And I mean, it's a bit of different sort of investment sort of paces or speed in different countries depending on where you are. I think the region where we are in, Germany, Poland, Baltic states, Nordics, U.K., is moving a bit quicker maybe than other countries, but still good demand in the broader perspective.

What is really important, of course, is, again, as I've said many times, you have to work diligently with your supply chain at depth, not only sort of the Tier 1s, you have to look into, okay, how resilient are you in the depth of the supply chain. When you come down to component level, material level, how do you make sure you have this in stock or they have it in stock to be able to deliver. And this is something we work really diligently upon to make sure that we have protection.

It's not sort of here and now really because we have quite a lot in inventory in stock. But over time, I mean, we have to create more resilience. And that's the same thing for all the defense industries and broader than that actually when it comes to dependency on China when it comes to raw material and looking at the data sensors and the memory components that now are in huge demand to build up these things. Of course, that makes it important to be on your toes and secure deliveries early.

Yes, absolutely. Another question we have is that Anna described that you have grown with 24% now CAGR during the period. Are you investing enough to really support that growth or getting capacity out there in, to say, in a decent way? What's your opinion there?

I think we are. I think we will continue to invest that much I can say. I mean we invest on the level of SEK 8 billion to SEK 10 billion a year in increasing capacity, and that continues now. And we will adapt that, of course, to when we have everything in place, which we don't have yet. We have facilities in U.S. coming into play this year and in India next year. And we will continue to invest, as we've shown already in the first quarter to make sure that we can handle our backlog, but also the demand in the market. So we are forward-leaning.

Absolutely. Please, operator, do we have the next question from the telephone conference?

The next question from the phone comes from the line of Henric Hintze, ABG.

This is Henric at ABG. So first of all, I just wanted to ask on the Aeronautics margin here. So it was down year-on-year. And I think even if you exclude the increased R&D amortization, it was still down a bit. At the same time, you're saying that Gripen is ramping while T-7A start-up costs are still impacting negatively. So I'm just wondering how we should think about that margin development there given those things.

From a generic perspective, I would say that -- I've always said that sort of without the underabsorption and the start-up things we have on the T-7 and the mix of other things, this business has the potential to have sort of high single-digit numbers on the EBIT side. So that's what we're aiming for in the end. Now we had the higher amortizations. We had the effects of the T-7 and then we had currency effects at the same time. Nothing sort of major happened elsewhere in the organization. They are ramping up and they are growing. So -- but that's sort of the trend view one should have going forward. So that's what we are aiming for, and we will get there.

Just to add on, on the currency, we had in the quarter -- comparing quarter Q1 2025, we have a positive currency impact. And this quarter we had a negative. So the effect is double, so to say, figure.

Okay. So it's mainly the currency impact.

Yes, yes.

Yes. And then now that you mentioned you usually say high single-digit EBIT margin for Aeronautics. Does the move of the Naval Combat Systems business unit in any way alter what you have previously said about the margin potentials in Surveillance and Kockums?

Well, we don't really guide on margins like that. But if you look at the mix of the business, of course, that changes a bit. Now the Naval Combat Systems, which you can actually dig into a bit, has the potential to be higher than the average 6% that we've shown in the slides here over time. It depends a lot on sort of the project setup and whether you have sort of a couple of problematic projects, which we've had and we've taken actions now to secure for the future that we don't get into more problems. So it has potential.

If you look at what can be done from a business perspective, having both sort of manned platform and unmanned capability in the naval domain connected to a combat management system, that is an offer that has potential to increase the margins going further. And since literally just pure facts is, of course, that if you remove sort of the Naval Combat Systems business from Surveillance, you automatically get a little bit of higher margin, since we've said that it had 6% average since 2024. So that's sort of the effects that we've seen so far. But the business will tell what the Naval business area will go when it comes to margins going forward. But it has potential. That's what we -- that's why we've done it as well to do more comprehensive business with combat system integration involved.

Okay. Very good. Maybe one final one from me just on Peru because there's been some news in the past couple of days here of the U.S. saying that Peru has decided to go with the F-16. Have you heard anything concrete from Peru?

I've looked at media the last sort of 24 hours. And if it's true that they have selected the F-16, of course, we have to respect that. We still think we have a better cost-efficient, better offer, but it's up to Peru to decide which one they want. We're looking into details, of course, to find out more, but I don't know more than that right now.

Thank you very much, Henric. We got another detailed question here in -- from the web chat, and it's about Skeldar. You wrote about that you had a good growth in Skeldar and that also you had an improved result from that part. What is Skeldar actually?

Skeldar Is a rotary midsize -- not a midsized helicopter, but it's a rotary midsized drone, you would say, that can do surveillance or yes, it can actually carry effectors as well. And it has had sort of an uplift in terms of contract because it's needed in Ukraine. So it's been part of the packages from Sweden donations to Ukraine. So that's was it is. It's a rotary drone, but a little bit bigger size and it's often used in the naval domain from ships to the surveillance and even actually checking what kind of fuel in the commercial market ships are using because it can sort of what you call it, smell the fuel type of that. So it has potential application-wise.

Okay. Good. Thanks for the clarification. Operator, do we have any more questions on the telephone?

The next question comes from the line of Tom Guinchard, Pareto Securities.

A question on the, let's say, new Surveillance division without Naval Combat Systems. So in terms of mix and margin here on the Giraffe programme. You said the 1X is ramping to 300 a year. How much could that contribute to margins? Because my guess is that the smaller systems have -- tend to have higher margins than the, say, the 4As. Is that a correct assumption? Or how should we look at the sort of mix moving forward?

It's very good to have sort of volume on that side. You're absolutely right. It does have good margins, and it is really cost efficient also from the customer side in terms of how capable that sensor is, and that's why the demand is so high. However, it's not -- as I'm trying to allude to, in the most expensive sensors. So if you look at the portfolio of Surveillance, of course, the GlobalEye business and a more long-range type of sensor capability, is, of course, creating sort of higher volumes in terms of revenue, but the more sort of G1Xs that we get out of the house and sell, of course, that helps the margin. No question about it. But how that will balance sort of the other parts of the portfolio is a little bit hard to say right now. When you get big contracts on the GlobalEye, that will be dominating also good margins, but maybe not as good as a G1Xs. But it helps that much I can say.

And in terms of R&D, are you looking at radar systems that are even more long range? Or are you sticking with the sort of existing platforms and building on them?

Well, I mean, we're not in the line of sort of those super big long-range systems, but we do systems up until sort of 500 kilometers on the land-based side, same on the Naval side. And then we have the whole portfolio to the G1X, which is 150 kilometers to 200 kilometers in terms of range. But -- so that's where we are, and we are investing, of course, in fighter sensor capability, which is important to us.

And then other versions of unmanned capability when it comes to airborne early warning. So there's lots happening on the sensor side for sure. But that's sort of where the R&D is going. And the other big portion of the R&D is, of course, autonomous systems in all domains, when it comes to the air domain, land domain and -- but especially now the air domain and the naval domain. And using AI is another big thing in terms of R&D right now is to give you a flavor of where R&D is going.

Thank you very much, Tom. Operator, do we have any final question in the telephone conference?

The last question comes from the line of Afonso Osorio from Barclays.

Micael, you had -- I think you mentioned before that you expect positive cash flow going forward. Is that on the annual figures? Or would you expect positive cash flow from a quarterly basis this year as well? Just double checking on that.

And then on the T-7 program, I appreciate it's still quite difficult to see the phasing of this in the coming quarters. What is the current run rate on the profit loss from this contract?

And then just one final one quick on the Middle East situation. When do you probably see this incremental demand flowing through your numbers? Is it going to be mostly from 2027? Or do you expect something extra in 2026 as well?

Well, on the T-7, I mean, you can look at last year, roughly SEK 100 million a quarter sort of on average and under-absorption, that will improve when we get more platforms out of the facility, of course. So that's roughly the run rate, if I remember correctly. Then the Middle East is -- we have some sort of business in Middle East. It's sort of Airborne Early Warning. It's some command and control, but -- and then sensors. And there is substantial demand on the sensing side right now and how much that -- where that will go, some deliveries is happening as we speak, and then there will be more deliveries coming. We've already delivered from demand and delivered within 2 weeks. So that's why it's important to manufacture sort of G1Xs on speculation rather than on contract. The first one was...

Was that, do we promise a positive cash flow every quarter? Or is it more than a year?

The guidance we have is, as you know, sort of cash conversion higher than 60% over the period of '23 to '27. There are always fluctuations between quarters when it comes to cash flow, depending on where the payment milestone lies and how our investments comes into play. So I can't sort of -- I can't give you any specifics on each quarter. But I can conclude that despite substantial investments this quarter, we had a good operational cash flow, which is excellent, which means that we get payments from our customers as well continuously.

And it's important to develop that way, either sort of advanced payments to finance initial things in programs or dense milestones in the contracts that doesn't mean that we have to be sort of acting as a bank towards the customer, and we're moving in that direction. So cash flow positive is important and more than 60% over the period.

Perfect. Operator, I think we have a final question. Is it from Morgan Stanley? Or do you have anyone left in the queue?

Yes, Marie-Ange Riggio from Morgan Stanley.

I have two actually. The first one is on Aeronautics. Can you just describe your production ramp-up of the Gripen because I think like you have quite a target internally to go to 20 aircraft, 30 aircraft in the future. So maybe just can you remind us what is your current production rate? And where are you in this journey to increase the rate?

And the second question is on Ukraine because we have seen increasingly [indiscernible] increasing conversation about the EUR 90 billion loan for Ukraine from Europe recently. So what will imply for Saab as a whole for the whole portfolio? And probably have you seen any progress in your discussion with them about the size of this contract? And can this EUR 90 billion loan be a source of funding for at least a first batch?

Well, when it comes to Ukraine, you're right. I mean, positively -- positive news on that sort of the funds will be released, of course, the EUR 90 billion. And from that, the EUR 60 billion is supposed to be used for military investments. And I assume it's not up the industry to create a funding structure of a deal on the fighter aircraft, but some of that money must be used, of course, for the fighter acquisition and then it has to be supported from other countries like Sweden and others that want to support Ukraine with fighter capability going forward.

So that's moving in the right direction now, but we don't sort of wait for that in terms of the discussions with the end user on the fighter discussion. We are, of course, working on the proposal and the negotiations as we speak on how to, over a period of time, get fighter capability to Ukraine as quickly as possible, which means that we are also looking into investments for that sort of ramp-up that, that would mean if they go for in the end over many years, of course, at 150 aircraft, that would mean that we have to sort of ramp up for deliveries on that from '28, '29 going forward. So that's we're doing as well. The first one, once again?

First one was -- the target capacity for Gripen, as we said it [indiscernible].

So, let's say, we are at roughly 15 a year now. And then we have now started to deliver from Brazil hub. And then we are looking at depending on the contracts that we get to be sort of somewhere between 20 to 30 and more likely to the higher end of that span. So that's how I see it. And that is as quickly as possible. But I would say sort of to be around 20 in a year's time is quite possible or a couple of years' time, a little bit higher than that. So that's sort of the time frame a bit generically speaking.

Thank you very much. Are you right with that, Marie-Ange?

Yes. Thank you so much.

Thank you very much. And I think we also have -- did we have a final question also, operator?

The final question is from Daniel Djurberg, Handelsbanken.

Sorry if this question has been asked already, I had to jump into another call for a minute and ask some questions there as well. But the improvement seen in corporate and other primarily related to the UMS Skeldar operations and high operating income from minority portfolio. Is that sustainable? Or was it one-time items more or less or how to think?

I can answer -- we had that question earlier, but I can answer it again. No worries at all. No, what we think is when you look at corporate, one good level to look at is the level that we had last year for the full year as a rule of thumb. In corporate, we have several costs that are depending on prioritization and costs that come later in different quarters. So -- and it's cost related to IT security. We're also building up our digitalization units and also costs related to the share matching plan and shareholder programme that we have. So different types of costs in corporate and changes over the quarter -- varies over the quarter, I would say.

Okay. Operator, do we have any further questions or...

We have no more questions at this time.

Okay. So I think with that, we thank you, everyone, very much for listening into our presentation of the first quarter of 2026. We will be on the road now first in Stockholm, then we are going to Copenhagen. You can meet us also at the Eurosatory show in Paris later. And then we will also be in Frankfurt. And then we will have the Q2 report in July.

So thank you very much for listening in, and have a nice day. Thank you.

Good morning, everyone, and welcome to the presentation of Saab's Fourth Quarter and Full Year Report for 2025. My name is Johan Andersson, responsible for Investor Relations, and I will be the moderator here today. With me here in Stockholm, I have our CEO, Micael Johansson; and our CFO, Anna Wijkander. Micael and Anna will present the report, and then thereafter, we will conclude with a Q&A session. [Operator Instructions].

So with that, a warm welcome, and I'll leave it over to you, Micael.

Thank you, Johan, and also a warm welcome from my side, and thank you for joining us today. I will start by jumping right into sort of the perspective of last year, looking at how we met sort of our guidance and our growth perspective. So we ended up with almost SEK 80 billion in organic growth, SEK 79.1%, which was excellent, 25% organic growth.

And then also had a very good development on our operating income, of course, growth 37%. And the cash flow was extremely good in the quarter, the last quarter last year. So we ended up all in all, at 5.3%. So we had an extremely good year last year. meeting all our expectations. And it is, of course, based on very good sort of delivery capabilities and how we actually performed in delivering to our customers over the year and showing that our capacity investments that we have comes into play.

Going forward and looking at some highlights, obviously, looking at the extremely high order intake in Q4, but also over the year, we see a high customer demand in the market, and there's very many initiatives that we're working, of course. And the product contracts continue to grow, but also we have a strong interest on the sort of bigger platform side, and that's why the balance of the large orders towards the medium-sized orders and the smaller orders have changed a bit.

So we still see, of course, volatility in the geopolitical tensions around the world, as you all know. And -- but I would say what's dominating the growth right now from our perspective is still that the European nations and the pillar of NATO, the European pillar of NATO has to sort of expand the capabilities, also quite clearly stated by the U.S. that we have to take responsibility for our own continent when it comes to the threat environment. So that is driving, of course, lots of spendings in Europe, but not only to look forward to future growth. And that drives mainly the growth for us, I would say. So we have a record order bookings, as I've said, and a very high backlog of SEK 275 billion.

Now a big thing that happened during the quarter, of course, was the selection by Poland for the A26 submarines, and that is extremely important to us, and we really appreciate that. And it will be good for our security policy between the countries, the Baltic Sea protection, of course, and a close collaboration between Sweden and Poland, but also between industries between Sweden and Poland. Now we are diligently working that contract, of course, it's not a contract yet, but I really look forward to finalizing that contract sort of during this year.

And then, of course, we have shown that we are capable in extending our capacity and expanding that. We -- all the time, we get new capacity expansions in play to support our growth. But there's still much more to do, of course, both when it comes to facilities and factories that will come into play. We have a U.S. factory that will be up and running late this year, and we also have an Indian factory as examples, coming into play next year. So those are a few highlights.

Coming back to the market position and looking at what I tried to sort of describe on a very high level that the mix of the product side of Saab, the portfolio, we are very well positioned in the marketplace, I would say. And I'm really grateful that we have a portfolio consisting of both sort of products, but also platforms and also being able to integrate systems together.

So of course, looking at last year, a few very important parts of contracts that happened was, of course, the Gripen to Colombia, EUR 3.1 billion that we are now executing, of course, according to plan. And then we have the GlobalEye that came in very late last year, which was really a good win, of course, the 2 GlobalEyes to France. And then the contract in Q4 also on the A26 submarines for Sweden, the extending capabilities that added to that contract. But also things like the electronic warfare capacity for the German Eurofighter is a very important contract to us.

And then as I said, product contracts on the missile side and the support weapon side is adding to an excellent sort of year for us when it comes to order intake. So order bookings of SEK 169 billion in 2025 and a really good outlook, I think, going forward also because of the market interest that we have.

Coming back to the quarter -- last quarter then '25, the fourth quarter. Of course, we have all noticed a fantastic order intake of SEK 100 billion in the last quarter, which is then a mix of large contracts with many good product contracts as well. So an extreme increase, of course, from the SEK 17 billion we had in the Q4 of 2024, an extremely good quarter, highest ever, of course. But also the sales growth, 35% organic growth is really good, including also the EBIT growth of 50%. And then as I said, the volatility in the operational cash flow side is over the year is quite sort of big.

So of course, we had an extremely good fourth quarter to generate SEK 5.3 billion over the year, SEK 6.3 billion. And as we've said all the time, we promised good operational positive cash flow. But over the year, it will vary a lot, of course. So this is absolutely the best quarter, I think, that Saab has ever generated, not only the best Q4, but the best quarter ever. So I'm really pleased with that, of course. A few comments on the different business areas then.

For Aeronautics, the Colombia contract was really the big event, of course, another contract on the Gripen E. So now we have 3 countries, and we're increasing capacity to deliver all these Gripen E fighters. And we have a number of campaigns going forward also a big interest in the market. So this is an area that is now growing for us going forward. And we are also looking into the next-gen fighter capability. But I think in the beginning, we will work to complement a Gripen E fighter with a collaborative combat aircraft, sophisticated, you can call it a loyal wingman and autonomous systems.

And that, I think, is the sort of the first thing that will happen in the future fighter sort of avenue that we're running. We have also the T-7 and the first one is now with Randolph Air Base. Now they are using it to start sort of creating the training for the pilots, but there's still many to deliver. And we're still we're still sort of affected by the under absorption that we have in the facilities in West Lafayette, Indiana, and that will be continuing for a couple of years more, I would say.

So that is going to be a good business for us, but we need to ramp up the deliveries. And we have only delivered a few so far of the 350 that we have on contract. And then a very important thing that happened, of course, that we're working diligently to sort of organize a contract around this, and this is a government to government and industry-to-industry initiative, I would say, was from the letter of intent that was signed between Sweden and Ukraine regarding fighter capabilities going forward.

So of course, we would like to see Ukraine flying the Gripens going forward. But we're working that, and we hope that the financing side of that will be sorted and also for us then to prepare for industrial collaboration, but also capacity increases. Dynamics still has a very strong demand in the market for their entire portfolio, I would say, from training simulation to Camouflage Net, but not the least from the missile and ground combat perspective.

So we have had quite a few large missile and ground combat orders in the quarter. So they have an amazing order backlog of SEK 90 billion. And this is also an area where we have invested heavily to increase capacity to deliver to our customers. There are more to come into play, as I said in the beginning, in both India and the U.S., but we have also already taken some capacity increases into operations, I would say, and we are booming our expansion also in Sweden, of course.

So this looks very good, and they had a growth of 50% quarter-to-quarter over the year. So that's an amazing result. Surveillance did have a very good quarter. I mentioned the GlobalEye from France from a market and order intake perspective, but also a strong demand when it comes to our EW equipment, our sensors, the Giraffe 1X, our fire control sites for the CV90s, but also other sensors, the weapon locating radars, Arthurs. And they are picking up on the project execution, and we see a substantial growth also here quarter-to-quarter of above 50%.

And we have -- we just want to mention that we have now divested completely TransponderTech, which affected the EBIT of the operational income of Surveillance by SEK 336 million. But even without that, they did a 10% result during the quarter. So that was a very good step for Surveillance.

Kockums was, of course, extremely happy and so am I on the selection by Poland. So now we are expanding capacity to build more submarines. And we have other segments, of course, in the underwater business, which is autonomous systems and a number of things in that area that has a high customer interest. And then, of course, we are working on the campaign to be part of the new Swedish frigates or Corvettes, but I don't know exactly when that decision will be made.

We have a partnership with Babcock. And of course, that is something that we work diligently on the surface side going forward. But we have a growth -- very good growth also in Saab Kockums of 20% and good project execution. And of course, also the Swedish A26 contract was important here. So they are developing in a very good way as well.

And lastly, we have Combitech, good momentum. Of course, the total defense perspective and how many things are happening in that area in Sweden now from an industry, from an agency perspective is supporting the growth of Combitech. The new agency, MCS, the Swedish and also on the civil aviation side, generates lots of business for Combitech, and they are good in this area, both from a cybersecurity perspective, but also how you set up resiliency in an organization.

So that is, of course, the growth is driven by increased number of consultants, but they are growing in a very nice way, and they are now a SEK 5 billion entity within Saab, which is absolutely fantastic. And they're really important for Saab as well since they have a number of very important participations in our contracts within the Saab business areas as well.

A couple of comments on the sustainability side. We have done a number of important things during the quarter. We have adopted formally now a human rights due diligence policy, supporting our responsible sales policy. This is something that generates a due diligence every time we do a contract with someone and sell something.

We actually go through in detail that we are not affecting anything related to human rights or things that we shouldn't be involved in. That's very important to us. We have a good development on the share of women managers in the organization, which has increased now to 29%. And we have a higher ambition than that, of course, but we are growing all the time, which is absolutely fantastic. And we have done well also on the emission perspective, the environmental perspective.

We have reduced our emissions 7% year-over-year, and we are on a good path supporting the scientific-based target initiatives targets that we have set that we have to be down 42% 2030, and we are now at 36% after 2025. So that's very good. And we are we have the ambition to be a market leader when it comes to -- in our segment when it comes to sustainability, which is not only environmental perspectives, of course.

And we -- but we have been highly ranked within the CDP when it comes to climate and water. We're in the highest ranking of 4% of the companies right now, which I really -- I'm impressed and I'm really pleased with that development.

So I think with that, I will hand over to Anna to go through the numbers in a little bit more detail.

Thank you, Micael, and good morning, everyone, from my side as well. Yes, it's clear that we have closed yet another successful year, and I will soon go into the details of the financials in the quarter. But before doing that, I would like to take the opportunity to show you some trends on what we have achieved so far.

So let's start looking at our graphs and what we have achieved for the sales growth. You know we are growing the company substantially. And during the last 3 years, we have grown an average 24%. And what's so good to see is that we have had double-digit growth in all our business areas during this period. And that is achieved, of course, through our strong offering and our strong portfolio that we have, but also our operation and our ability to grow our operation.

And an important factor to that is that we also have increased the number of employees by around 10,000 people, now adding up to the 28,000 employees that we are today. And we have a really strong company culture where we have a good focus on both delivering on our commitment, but also building the company in the future. The EBIT has also grown in this period by 33% compounded average growth rate.

And that really shows that we are leveraging and scaling on our growth, growing more the EBIT more than we grow our sales growth in average. And we should remember that during this period, we have invested substantially both in R&D and in capacity investments. So over this period, we have doubled our R&D, and we have actually tripled our CapEx. Now look into the quarter then more in detail.

We have increased the EBIT by 50% this quarter. I think one should remember that, that is an exceptionally strong quarter, and that is, of course, largely driven by our sales growth. And what's also visible in this slide is that we have a volatility when it comes between quarters that is really reflected here in this slide.

This quarter, I want to highlight Dynamics. Here, the EBIT grew by 19%, although the margin is a bit lower compared to what it was last year in Q4, and that is primarily related to project mix within Dynamics when comparing year-over-year. But if you look at the trend for Dynamics, it's very strong for the year. The EBIT growth was 46% and the EBIT margin for the full year was 18.1%, an increase from last year as well.

Also surveillance is worth mentioning this quarter with a growth in EBIT of 83%, and that was very much driven by high project execution and several deliveries in the fourth quarter. In addition to that, we had a positive effect when we received the order for the GlobalEye France contract in the last days of December since we, in that project had started some activities already when we got the letter of intent in the summer.

I can also mention that we had this divestment of TransponderTech that is visible in the numbers of surveillance, but it's excluded here in the figures that you see for the EBIT for the quarter. For the full year then, the financial summary, we grow our sales with 24.1% reported organically 25.6% impacted by currency, so SEK 79 billion in sales. Good growth also in gross income and EBIT was growing 37%, and we ended up with 9.8% EBIT compared to 8.9% last year. That was mainly driven by Dynamics and Surveillance.

Another thing to point out here in this slide is the financial net that improved substantially compared to last year. And here, we have a positive impact this year from the SEK appreciation, where the revaluation of our tender portfolio from currency hedge in the tender portfolio had a positive impact this year.

Last year, it was negative. So that's why we have a big swing there in the financial net. Also good, the net income and the EPS grew by 51% over the year. We have talked about the cash flow. Micael talked about the cash flow. It was very strong in the fourth quarter, where we both had several deliveries and received a lot of customer milestone payments.

And as we can see on the slide, we have the cash flow from operations now amount to SEK 12 billion approximately. And we have increased our investments. So they are now SEK 7.2 billion this year. If you compare to last year, they were SEK 4.8 billion. So all in all, we achieved a cash conversion this year of 68%, which is well above our midterm targets. And also our return on capital employed increased to 16.5% this year. So driven also by this strong cash flow, the net cash position has improved this quarter, and we're ending up the year with SEK 4 billion in net liquidity.

So our balance sheet continues to be strong, and we have a cash and liquid investments amounting to SEK 18.7 billion. And adding to that, we have an unutilized revolving credit of SEK 6 billion as well. So following this strong financial performance -- financial position, the Board of Directors will propose to the Annual General Meeting that we increase our dividend by 20%, amounting to SEK 2.40 per share.

So let's again zoom out a bit and look at some trends on what we have achieved so far, '23 to '27. Cumulative over these first 3 years, we have delivered cash flow before operation of SEK 26.4 billion. That is a strong enabler for us that we have been able to invest more in capacity expansions and which is important for our foundation, growing our company, as we know, investing in new capabilities, new facilities, new production sites and new products.

And in total, over these years, we have had investments amounting to SEK 15.5 billion. And measuring of the period, we have achieved a cash conversion of 62% so far. and generated approximately SEK 11 billion in operational cash flow for our company. Another parameter that has strengthened this quarter is our backlog. We had a strong order intake this year, SEK 169 billion on the year and SEK 100 billion this fourth quarter. So we have built a substantial order backlog to deliver from going forward.

And compared to last year, we have extended both the duration of the backlog for the years to come, but also increased the backlog for the closest years '26 and '27. So it's increased 29% for '26 and 46% '27. So this really gives us a good comfort for future growth and a good foundation for growing the company within the years to come.

And finally, just look at the trend of the backlog that has been strong for -- the growth has been strong over the last years, amounts now to SEK 275 billion and corresponds to 3.5x our sales that we had 2025. So this is really supporting our long-term growth.

So by that, I hand over to you again, Micael, to guide us through the midterm targets.

Thank you so much, Anna. And yes, coming back then to our medium-term targets, I mean, one has to reflect a bit upon that this is our way of measuring progress over time, of course, and our best assessment of how this business will evolve over time. And we have performed really well.

As you know, Anna mentioned, we have had 24% in average growth over the period of '23 to '25. And as I will show shortly, we are increasing our now target to 22% in average over the period of '23 to '27. We think we have a very strategically positioned portfolio, of course, that is fitting the market demand in a very good way.

And now when we see the product offering growing and the contracting order intake on that side growing, in combination with better performance on the platform side, even though I recognize the fact that many of these sort of campaigns are not only about the great offering that we have, but also political decision. I think we have a very good position having both in our company.

And we have shown now during the last few years that we are able to ramp up both from a sort of increasing our company in terms of great employees supporting us, and we have a very attractive company to come and work for, but also our capacity increases when it comes to production and getting a lot of the backlog sort of delivered to our customers, which is incredibly important.

We will continue to invest and never compromise sort of anything that has to do with the future when it comes to R&D and new capabilities, embracing new technologies. and continue to expand capacity, of course. So we will continue to invest to make sure that we can meet this market demand.

And now also going into the target upgrade that I will show you, we -- of course, as Anna showed just shortly before, we have a record order backlog of SEK 275 billion, which has now also increased in terms of how that is spread over the years. So all in all, this is a very good position that has led us to going from a previous target perspective of 18% average growth over the period '23 to '27.

We have upgraded that now to 22%, quite a step for the full period up until '27, which implies then, of course, that we will generate roughly 20% average over the next 2 coming years, including '26 and '27. We continue to reiterate our targets of growing our EBIT more than the sales growth, and we also continue to reiterate our target of having a good cash conversion of more than 60% despite all the investments that we are doing now and going forward. So that's a good sort of sign of that things look very good going forward.

And from that, I am pleased to take questions.

Thank you, Micael and Anna, and let's go over to the Q&A session. [Operator Instructions] So please, operator, do we have the first question from the telephone conference?

[Operator Instructions] The first question comes from the line of Daniel Djurberg, Handelsbanken.

Congrats to the stellar performance. I would like to ask a little bit, you obviously have a great order visibility on both volume and mix for '26. And I was wondering if you could give -- share any more information about how to think on operational margin development in '26 based on this visibility perhaps on group level or possibly in some of the business areas. That would be grateful.

Well, thank you. First of all, I mean, I think we -- as I said, we have a good market position. And we, of course, see a good trend in terms of growth on the product side. When I say product side, I mean, Giraffe 1X, the RBS 70, the support weapons side, training and simulation, you name it. It's lots of products that is growing in a very good way. But then there are sort of a number of campaigns that are quite big, and they are, of course, more difficult to sort of assess when they -- when the decisions will be made and how political they will become and all that.

So I mean, an obvious one is that we must contract now Poland on the submarine side, which is roughly, as we've mentioned before, a SEK 30 billion type of contract. But that's sort of something everyone knows. Apart from that, of course, there are an assessment of the GlobalEye within NATO that will come to a decision hopefully now in the first 6 months of this year. But I can honestly not sort of predict completely how the mix will look like in the end of the year. But broadly speaking, we have quite a few campaigns that sort of can generate good order intake, supported by the continuous growth on the product side.

I won't go into talking about operational margins and what have you more than that we continue to grow this top line and we continue to grow the EBIT more in terms of growth. And obviously, I think we are we are doing well on that side. The mix will define and there will be different mixes in different quarters exactly where we will be. But sort of that's the trend that we have right now. And this is something we are careful about also looking into the investments we have to do and the R&D efforts we have to sort of continue to perform really well in to be capable going forward. So you won't get sort of a specific number or a range or anything. You have to, unfortunately live with sort of the guidance that we've given on growth of EBIT, I think.

The next question comes from the line of Ian Douglas-Pennant, UBS.

So on your medium-term guidance, so there's some language in the press release saying it's implied 20% growth expected in 2026 and 2027. Could you help us understand the phasing within that? I mean, I know you don't want to give 2026 guidance, but can you just help us roughly understand, presumably, there's more growth in '26 and '27. And then related to that, again, how much of that guidance is secured by orders you've already received and where any risk around that guidance?

Well, as you saw, I mean, from what Anna showed on how the backlog is spread over the years, it's high numbers already in the backlog, both for '26 and '27. And then, of course, it's up to us to generate sales new orders. And that is sort of varying every year, but it gives us quite a confidence that we can reach sort of an average, as I said, 20% growth over this year and next year.

And I won't sort of go into any sort of specifics on '26 versus '27 because then we go into guiding for both years simultaneously. And that we've decided not to do that. But take a look at the backlog, how it's spread and you can have a view of sort of what can we achieve in terms of sales new orders, which can be also looked upon in a retrospective perspective, of course. But that's where we are. So I won't divide '26 with '27 in a more sort of detailed way. This is where we are. And 20% average is good.

Perfect. Thank you very much for your question, Ian. Do we have a next question from the telephone conference?

The next question comes from the line of Tom Guinchard, Pareto.

A question on Surveillance margins here just looking into '26, '27, '28. You mentioned on the Capital Markets Day earlier last year that you had some unprofitable business that you're managing? And how much of that has been dealt with as of today and sort of margin potential there for surveillance going above the 10% EBIT margin line. Can you comment anything on that?

Well, I think, I mean, as we're showing right now, surveillance should be a profitable business. I'm not going to guide in detail on that, but they should be on or above 10%. So that's sort of the business they have in the mix. And I would say that we have taken steps to sort of either mitigate loss-making business or sort of making sure that we have a sort of a crossroad decision on whether that business should be within surveillance or not. But we're not done yet. That will continue a bit this year to improve even further.

So if you're asking, have we divested the loss-making business yet or sort of stopped sort of the losses completely? No, not yet. We're working it. And we'll tell you when we have done it completely.

Perfect. And just a quick follow-up on the T7. You said a couple of years ahead with negative numbers here and increasing cost. You said throughout '25 that costs actually accelerated for the T7 program. are we looking at '28, '29 or mid-'27 that you previously indicated?

I think we're looking at '28, '29 actually. But with one sort of comment on that, this is based on the numbers we have now in our contract and how quickly the U.S. Air Force wants to receive sort of the aircraft going forward. This can change a bit depending on renegotiations between Boeing and the U.S. Air Force that will sort of flow down to us, and it can change from a margin perspective overall in terms of getting additional contract into the business. This has not happened yet.

But as we speak, I mean, you have to think we have probably 25 to 30 aircraft in the pipeline in the factory right now. And it's just sort of to get the flow out of the customer that we need to achieve. And it's a bit sort of -- I can't be sort of exactly sure on which year we will now pass sort of going positive perfectly, but it's not this year, I would say, if I'm going to be honest, but Aeronautics as a whole will improve. But this is where we are on that program. It will be a good program to us.

There will be many, many aircraft delivered to U.S. Air Force and others. So this is numbers that we're not used to on aircraft side. This is 1,000 aircraft and beyond that in the end. And we're just in the beginning having delivered a handful of aircraft. So yes, that's where we are. So it will be a good thing, but it unfortunately takes some time.

Many thanks, Tom. Let's take 2 questions that we have received over the web here. One is around Canada in Gripen, and it was a lot of discussions and media around that for a couple of months ago. Are we seeing any progress? Or have we -- is that relation progressing?

Well, Canada is, of course, looking into -- looking to a crossroad decision, I would say. There are 2 parts of Canada. One is campaigning to win a global business in Canada, and we're waiting for sort of that procurement to happen. That's a campaign. Then Canada is looking into, do we want to have sovereign capacity when it comes to aeronautics having more of a -- not to be too dependent on the U.S. by having a dual fleet, maybe both F-35 and the Gripen.

And there, we are providing all detailed information that they need to understand what it would mean to Canada. How quickly would we do a technology transfer? How quickly can we build up a Gripen hub in Canada for manufacturing? And how would they be involved in the full export market perspective of the fighter business. We're providing that, and they're asking questions.

We are providing that, but it's sort of a very high-level political decisions that they have to make. And exactly when they will make that decision, I don't know. But of course, we have intensive discussions around this, absolutely.

Perfect. Many thanks, Micael. Another question on that is that we have seen media figures that you're ramping up the Gripen production capacity to around 2030 in the coming years. Are we progressing with that? Is that going according to plan?

We are. We're taking many, many initiatives and investments to make that happen. And we already now have 3 contracts to deliver to Sweden, Brazil and Colombia. So that is going according to plan, and you will see more and more aircraft leaving the factory in Link�ping, but also in Brazil. And if we are successful in the market, maybe we'll build another hub somewhere. But right now, we're focusing on the Swedish and the Brazilian hub, of course, to expand that. And that is going according to plan.

Perfect. Thank you very much. Operator, do we have any further questions on the telephone conference?

The next question comes from the line of Carlos Iranzo Peris, Bank of America.

On the GlobalEye, how should we think about the delivery time line of the 3 GlobalEyes to Sweden? Any chance you could put forward those 3 deliveries? And if you can share any time line to go to 4 per year on the GlobalEye?

Well, on the GlobalEye contract to Sweden, I'm not sure we're going to say an exact delivery date on that, but it's not far away. We are working diligently on all 3 aircraft now. So Sweden quickly needs the capabilities. In the next couple of years, they will have it. And that's sort of what I can say about the Swedish contract. And then if the question was the pipeline on GlobalEye going forward, there are quite a few.

I mentioned the NATO initiatives. We have provided information, a request for information from NSPA, the acquisition authority within NATO. And because there are 9 countries now, the partner countries that want to have a common -- use a common NATO capability. And I think we have a great offer there with a great schedule, and there is a gap here, so they need it. So that's an obvious one. The Nordic perspective, I think it's interesting how can the Nordic countries combine efforts in using an airborne early warning capability. It hasn't materialized yet. Sweden has contracted 3.

Let's see if we can get the other countries involved in that. Then we have an interest. France actually contracted 2, but there is an option for 2 more in France. We have an interest from a couple of countries in the Middle East for this capability. So yes, there is a great interest for GlobalEye, and we're also increasing our capacity to deliver a number of aircraft per year also on that side.

Perfect. Thank you, Micael. Sounds promising. Operator, do we have next?

The next question comes from the line of Bj�rn Enarson, Danske Bank.

A question on Dynamics and the capacity expansion that you are doing in India, also Sweden and United States. Are there any -- how would that impact the profitability like near term, midterm? Or are there anything that will distort the picture? Or will it be a good drop-through from day1?

I think the mix of things will -- we haven't taken into account that, that will have sort of a moment effect somehow at a specific moment, an effect on our profitability. I think it will be a very automated setup in the U.S. and also to some extent in India. And then it more depends on the mix of how the contract looks like in our facilities there going forward.

When the individual salt munition production comes into play in Grayling in Michigan, of course, it depends on volume rather than whether the facility is efficient and also combine that with Ground-Launched Small Diameter Bomb. It will be good contributions to capacity. We haven't sort of taken any assumptions on that it will affect profitability really.

We will, of course, have some sort of learning curve in these facilities, but the Dynamics will still sort of have good numbers going forward in terms of the mix that we see. I wouldn't sort of connect a specific factory that comes into play to any effect on Dynamics as such. It's not on that level anyway, that it will affect us.

I think I can just add...

Normal business basically.

And the capacity increases are really happening stepwise. It's not just a big boom. It's happening in different places and different steps gradually.

Good. Thank you very much, Bj�rn. Operator, do we have another question from the telephone conference?

The next question is from Afonso Rosario, Barclays.

Micael, can I just follow up on this backlog situation? Given the significant number as of today, can you tell us the average duration of the contracts that go beyond 2029? I'm just looking at this Slide 21, where you showed the phasing over the coming years, and it will be super helpful to have your views on the story beyond 2029. That would be great.

Yes. Anna showed a slide on that, but it stretches, of course, until 2029, right? Yes. Okay. So well, I think it's a good spread over the years. I mean, already, if you look at '29, it's like after that, we have still like SEK 35 billion to SEK 40 billion in backlog to deliver. So it's a good spread, but it's also quite high level sort of during the first few years that has increased substantially from sort of the same position we had last year. So it looks good from a long-term perspective.

I mean the big platform contracts are adding to the long-term perspective, while the product side of things is very much more short term, like sort of within 2 years. So when we get contracts on the platform side, submarines, GlobalEyes, Gripens, of course, that sort of extends our backlog over many years to come. And that's good for us. So that's why the balance is important. But then you can't predict in the same way exactly when you get more product contracts. You don't get 10-year contracts on Karlskoga ammunition, for example. That's not what we have. But the platform contracts are quite sort of beyond 5 years in terms of how they spread.

So I can only say we have a very good market position, as I tried to say, and we are confident that the capacity increases that we're now taking into the operations will sort of give us a possibility to meet the market demand. And we don't see that sort of diminishing in any way as we speak. And as I said, difficult to say exactly when the bigger contracts will come into play and how political they will be. So this is the world we live in every day. But it's a good spread and a good backlog.

The next question comes from Mikael Las�en, DNB Carnegie.

Okay. I have a question around the order backlog and the capacity situation. I'm wondering if you can say something about where you are most capacity constrained today and where are the 2, 3 concrete bottlenecks that you could fix in '26? And also comment on the CapEx coming couple of years.

Well, when it comes to where are we most constrained, I mean, I would say if there's one thing that we work diligently now, it's maybe not our factories or capacity increases as a prime that we're worried about them being set up. It's the material supply, it's the supply chain that we work diligently. So we know that the ecosystem of companies we work with supports us in this growth journey. There are pain points there.

That's sort of -- but I wouldn't point to any specific, we have certain issues on the missile side. We have certain issues on the ground combat side, but we also have issues on the sort of fighter side. So everything, if it's summarized, comes down to we have to be extremely diligent on making sure that we have a balance by sort of what kind of inventory level do we have to have to support our commitments and how can we assure that we have commitments from our supply chain to support us in this growth journey. I wouldn't point to any specific area where we have more problems or possibilities than any other areas, I would say.

We're doing well, but I'm just saying that this is a huge ecosystem of companies in the supply chain at different tier levels that everyone uses. So it's not only us. So we also have to make sure that we are sort of proactive in how we work with our suppliers. So we get priority.

To add on the -- regarding your question regarding investment levels, I mean, we have increased investment substantially this year, and we see continued need for high investment levels going forward as well. So...

Absolutely. Good. Let's take another one here from the...

It won't be less than the 7.2% that you saw this year. That much I can say. But still with good sort of -- as you've seen good targets.

Good. Another question here from the web. You were selected by Poland in quite fierce competition. Why do you believe you won there? What's your edge on the submarine side?

Well, first of all, this is about sort of how do we, in this region make sure that we protect the Baltic Sea and create returns through acting in the Baltic Sea. And of course, the A26 is a fantastic conventional submarines with capabilities that are adapted to that environment.

And then, of course, Poland and Sweden have -- both countries have naval capabilities that can work together in an interoperable way. And we can train together, of course, if we use the same submarines. So it's both a security policy perspective, defense and deterrence perspective, adding to the capability in the Baltic Sea. But then it's about that we have a great product as well.

And on top of that, we want to establish industrial collaboration so we can have redundancy in capacity at both sides of the Baltic Sea. So it's a number of parameters, of course, that are really logical to sort of make this happen between Sweden and Poland and between Saab and Polish industry. So -- but in the sort of the foundation of everything is that we have a great product.

For sure. Yes. Good. Another one, you talk a lot about innovation. Can you give 1 or 2 examples, either of something you just have released or something that's really keen about that's coming out?

I hope that people understand what we did sort of during '25, during the summer, and we're continuing to do that to have an AI agent supporting a pilot in a fighter aircraft like the Gripen E is something quite unique and how much that can add to the work sort of load of a pilot in different types of emission.

It's a fantastic innovative example of innovation example of what we quickly can achieve with existing air forces. But then, of course, as anyone else, we have innovative sort of R&D that has led to counter-UAS systems, for example, the local system, which is involving our C2 systems, our radars and our track. We're part of what was launched this week, Sweden and Denmark spending SEK 2.6 billion on counter-UAS systems for Ukraine.

And of course, our C2 and sensors are part of that as well. And then we have SOM technology on the quadcopter level, so to say, that can do missions for the Army. And we're working sort of specific autonomous systems also in all domains. So we have many, many innovation initiatives that we are spending money on to embrace new technology and work with partners on.

Great. Operator, do we have a final question on the teleconference?

We have a follow-up question from Renato Rios, Inderes.

Congratulations to your team on a great quarter. So you keep growing a lot and you have increased your medium-term target for the revenue. In absolute terms, that means that you -- from an observant point of view, it's quite challenging in terms of absolute values that have to be delivered like volume-wise.

And in the industry, it just -- it takes a bit to align capacity, sometimes it takes years and you have to build factories. So obviously, you are ahead of that because you are hiking your medium-term revenue targets. So based on that, could you give, I guess, as much context as you can on the capacity requirements to deliver the growth that you're expecting through 2027?

I mean, is the capacity and the supply chain already fully or mostly aligned to deliver on that? And included in that answer, you could just -- it would be nice to hear you reflect out loud about the constraints that would make it difficult for Saab to deliver on the new targets.

Well, it's, of course, impossible to say that this specific capacity in terms of a facility or a factory needs to come into play for us to deliver this portion of our backlog. It is not happening sort of like a one-off thing. It's happening gradually. And specifically in Sweden, when we invest heavily in the Karlskoga area, where we have 40 sort of construction projects ongoing, one by one, they come into play to support this backlog.

Now we have capacity to do lots of the backlog. Our investments are also meant to take us even further, of course. It's not that we have -- everything we've talked about in terms of investment do not have to come into play fully for us to deliver this backlog. It's not that much connected on that level. We can do lots of this with the capacity we have, but we also need to have more going forward. That's our view of things. I don't know how to elaborate more on that.

Of course, the factories we've talked about with that capacity, but they also need to be filled with new orders. So we have both in this. That's all I can say. I mean, we are taking a big responsibility from the demand perspective in the market to be proactive to provide capacity, which all politicians are saying that we have to because the growth will continue. So it's not 100% clear answer.

But you can look upon, we have up until now, in certain areas, four, fivefolded our capacity compared to what we had like in '22 in terms of ammunition and sensor capability, it's a lot higher already. But we think more will be needed. And some of it is needed to sort of deliver on the customer commitments that we have in our backlog, but some of it will be devoted to future contracts. I don't know how to answer the question in a more detailed way.

Operator, do we have any final questions on the telephone conference?

The final question is from Ian Douglas-Pennant, UBS.

You mentioned that late in the quarter, you booked some GlobalEye milestones. Could you help us size that effect, please? Just -- I'm sure you're not going to give us an exact number, but just roughly how important was it in terms of driving the outperformance versus expectations in that division, please?

Yes. In Surveillance, we did have an effect of recognizing revenue and profit from the contract we got in France, obviously, but it's not super substantial. I don't want to give an exact number to it. It would have been good numbers anyway, but there is some revenue recognition and profit recognition from that contract because we have been selected and we had agreed to start sort of our work to make sure we keep the schedules and that we did. And that we could, of course, recognize then when the contract was formally signed. But it was not so substantial, so that drives this fantastic quarter in any sense.

And operator, I don't think we have any further questions in the telephone conference. Do we?

There are no more questions at this time.

Okay. But I think with that, we will conclude the presentation of the Q4 and the full year results from us here at Saab. Importantly, we will be on the road now for both here in Stockholm, Paris, London and Helsinki as well during the coming weeks here. So looking forward very much to see you out there, and then we report the Q1 then in April. So thank you very much for listening in today, and have a nice day.

Good morning, everyone, and welcome to the presentation of Saab's Q3 Report for 2025. My name is Johan Andersson, and I'm honored to have been appointed Head of Investor Relations here at Saab. With me here in Stockholm, I have our CEO, Micael Johansson; and Anna Wijkander, our CFO. Anna and Micael will present the report, and thereafter, we will start the Q&A session. And you can either ask your questions over the phone or you can enter them in the web interface, and I will read them out loud here in Stockholm.

So with that quick intro, I will hand over to our CEO, Micael.

Thank you so much, Johan, and thank you all for joining us this morning for the quarterly 3 report and the first 9 months. I want to welcome Johan as well as Head of Investor Relationship. So you're most welcome to the company. And I also want to thank Merton Kaplan for an excellent job during so many quarters and back old -- looking backwards. And then I wish him luck, of course, in his continued journey within Saab.

Before I go into the highlights of this quarter, I just want to say a few words about the day we had Wednesday in Linköping, where we the had honor of receiving President Zelensky and his delegation and also our Prime Minister and his delegation to host them for this important statement and letter of intent that they signed in the direction of creating a strong air force in Ukraine going forward.

This was, of course, a unique day and it was an important statement which we have been waiting for to now continue our journey in exploring scenarios and planning for how an establishment and delivery so quite a few aircraft will look like in Ukraine. And it also adds to our assessment of investments that we need to do looking into that. With all due respect, I mean, there's no contract yet. Still a lot of work to do. You heard the President Zelensky and also Prime Minister Kristersson talking about sort of the financing solution and what needs to be established there. And then, of course, there are a couple of other things. But we will start doing our work to sort of support this going forward.

And it was great to see our employees in Linköping spontaneously applauding and sharing when President Zelensky stepped out of the car, and we're so much committed as a company to support Ukraine going forward. That was a unique and fantastic day. And now we will work hard to sort of make this happen as well, of course.

So with that, I just want to go into a few highlights then of the quarter. It has been a strong demand in the market. We still have lots of geopolitical tensions, of course, around us and strong demand from many countries in all avenues of our portfolio and we develop contracts really well. We had a strong quarter when it comes to order intake, as we've seen. But it's also timing. It's sort of on the same level as the quarter last year. But in October, only after the closing of this quarter, we have SEK 16 billion in order intake. So we're looking toward a really strong year when it comes to contracts as well.

We have a number of campaigns apart for our product sort of demand in the market that we are running, of course, both when it comes to the Gripen side, and we'll come back to that; and also GlobalEye, where a number of countries have a huge interest in our system. As you know, we've been selected by France, and now we're just waiting to sort of -- them to sign the contract in that country as quickly as possible. And then we have interest actually from NATO and from Germany and from Denmark, and a number of other countries is looking into our GlobalEye system.

So there is still a need to continue to invest in capacity, which we're doing in a diligent way, I think. And looking at the execution this quarter, which has been solid in sort of a normally weaker quarter, but it's really been stronger this quarter. And as you've seen, I mean, the first 9 months is now an organic growth of 21%. So we've done really well also adding the third quarter to the first two ones here. And we will continue to look at our development of our profitability, which has also been good. But we'll also never trade off versus sort of investing in capacity to sort of meet the demand in the market, of course, but also being relevant when it comes to new technologies that we have to invest in going forward.

All in all, it's been a strong quarter, and we have, as you've seen now, upgrading the outlook for '25. I will come back to that in the end. But we're now sort of raising our guidelines on top line to 20% to 24% from 16% to 20%.

So back to the numbers. As I said, almost SEK 21 billion in order intake, a good increase in the medium-sized story. It looks a bit different between the quarters. And I think, as I said, we added SEK 16 billion only in October, which we have press released. So it looks really good going forward as well. We have a book-to-bill of 1.3x and a very strong organic growth in this quarter, the strongest quarter we've ever had on top line and also in absolute numbers when it comes to EBIT. So the margin is now 8.7% in the quarter but 9.3% looking at the first 9 months.

Cash flow is on the same level. If you look at the first 9 months, sort of minus SEK 1 billion roughly. We have still the same view as last year. We will generate a positive cash flow. We have a number sort of important payments coming in now during the fourth quarter. So I'm confident that we will meet our guidelines on that as well.

A few statements about the different business areas as usual. Yes, of course, a big interest in the Gripen conversion now. We have contracted Thailand during the quarter, the first 4. And they are looking into further contracts as well, of course. The batch 2 and batch 3 of their contract is being discussed already. And then, of course, we have been selected by Colombia and we are negotiating a contract there. We have no contract yet but we are moving ahead in a good pace in Colombia. And then, of course, the interest now from Ukraine is something we will sort of take into account and start planning for, as I mentioned.

We have a good strong quarter from Aeronautics. They have gone 34% up sort of compared to the quarter last year. So they had really good project execution in the Gripen program mainly. But still, the profitability level is affected by ramp-up costs that we have mainly in the T-7, the trainer aircraft in the U.S. in West Lafayette. So that is still sort of a burden to Aeronautics, but they're moving in the right direction definitely.

Dynamics, again, good growth. A quarter that is normally quite weak for Dynamics has been quite strong actually. If you look at the first 9 months of Dynamics, they have grown 34% or something, maybe even 36%, if I remember correctly now. It's an extremely strong year for Dynamics. They have had a number of medium-sized orders but also a large one from the Czech Republic when it comes to the medium, short-range air defense system RBS 70. So there is still a big demand in the market and we are investing heavily, as you know, to increase capacity in this area. I think we have only in the Karlskoga sort of 40 projects ongoing to expand everything and building factories in the U.S. and in India, as you know. And they have a huge backlog now of almost SEK 90 billion as we speak.

Surveillance, also a very interesting portfolio. I said that the campaigns for the GlobalEye are a number of them now. So we are intensifying that, of course. I hope that we will see this GlobalEye system, which is the state-of-the-art system, most modern one, taking a bigger position also within the Alliance with multiple countries going for GlobalEye. So that's what we're working. And the first one that we were selected upon is, of course, France that you know all about. So there is not only on the GlobalEye side, but the surface side, the surface sensors, the sensor side of Surveillance is really strong and getting more and more contracts. And they deliver quite well as well, growing 8%.

And honestly, the quarter 3 of Surveillance is the strongest ever top line-wise. So they are doing well also when it comes to project execution, and they have a huge potential going forward, I would say.

I also want to mention that we are divesting TransponderTech, which is communication and automatic identification system type of entity, as we have also already press released. And we will close that deal now in quarter 4. Also a very big backlog on the Surveillance side, as you can see, SEK 55 billion.

Saab Kockums also have a big interest in many segments. We're working campaigns now on the submarine side with Poland, and that we're putting a lot of effort into, of course. And it makes lots of sense to have Sweden and Poland work together to protect the Baltic Sea. But also on the surface side, we have the Swedish corvette/frigate program coming out, which is called Luleå class, which we are also seeing as a big potential going forward. But there are many other export contracts where we are involved. And we have also now invested but also got the contract to look to design and test a large underwater unmanned vehicle with the Swedish Navy, which is great to see that we're moving in that direction. Because also on the Navy side, it's not only in the air you will see collaborative combat entities working with manned entities. That will also happen on the surface and subsurface going forward.

We also got a task, which is a fantastic honor, to lead the project within NATO when it comes to underwater battlespace project, connecting and creating interoperability between manned and unmanned systems. So that, we look forward to execute. And the growth is really good, 17% year-on-year when it comes to the quarter, and they are really moving in the right direction. And they have a substantial backlog. I need to mention, of course, that after the quarter in October, we got an additional contract, as you've seen, on the submarine side for SEK 9.6 billion, adding to the backlog now going forward.

And then finally, when it comes to our business area, Combitech. We have, of course, a very well moving forward Combitech, our technical consultant entity. They are growing also rapidly year-on-year 17%. It's all about sort of employing new people, of course, and getting utilization into the operations that create these numbers. And I think we've employed 200 people up now only in this quarter from the Combitech side, and that adds to the growth, of course. We're doing well as a consulting company. We're absolutely in the right areas, in the right niches right now, cybersecurity, critical infrastructure, critical communication, creating security operation centers for many type of industries and also from the -- in the public side, the authorities. And everything connected to total defense in terms of resilience is something that sort of generates business now for Combitech going forward. So they had a good quarter as well, definitely, and they're growing quite a lot over the year as well.

So I just want to say a few words about something that's been discussed every day, every week in terms of what's happening in Ukraine when it comes to drones and what kind of drone capability do we need going forward and counter-drone capability. And also the EU Commission have launched projects now during the last few weeks, which is sort of a drone wall, making sure that we have resilience versus big drone capabilities coming from the East. And I just want to mention that this is something we really are investing in, and we already have solutions in place. We don't talk so much about this, but we have already used these solutions in NATO missions in Poland.

We call one system -- the way we approach this, I say, is to make sure that we are quite agnostic when it comes to what effectors or interceptors do we use. We can use everything from Bushmaster Gun to an electronic warfare type of effectors to nets or kamikaze drones or actually RBS 70, and we are now investing in a new missiles that you've heard about called Nimbrix, which is in a segment between the guns and the RBS 70. So that's sort of agnostic. We can sort of integrate the system that would manage different types of threats.

And the Loke system is sort of a brand name of the system includes, of course, a sensor capability with the Giraffe 1X, which is excellent and the most state-of-the-art radar, that you'll find everything from micro drones to larger drones and cope with many threats at the same time, a commander control system, which is really compact and then an interceptor vehicle that would have sort of the chosen effector on it. That -- a counter UAS system already established in Sweden and used in NATO missions.

The loitering munition side or actually having a known swarm technology capability. We have already released that we have something that is self-organized in terms of software and using AI to have swarm of drones during different types of missions. And I think we are focusing, among other things on not only surveillance but also loitering munition. That is important because of how you would manage an aggressor going forward, not only with support weapons that called Gustav and anti-tank weapons, but you can also use drones to accomplish part of the mission and work together with support missions. So we are involved in this area and ramping up our capabilities, and we already have existing systems.

A couple of highlights from the sustainability area, a very important area to us. We have this quarter established a biogas facility in our site, which is the Barracuda entity in the Gamleby, which is doing camouflage and signature management. which reduces our energy dependence on fossil fuel, of course, dramatically. And if you compare year-to-year in the first 9 months to last year, we have reduced 4% on the CO2 emissions. And we are on a good track now to support our SBTi targets, where we have said we will be 42% down 2030. And if you look at the base year compared to where we are now, we are 33% down.

We have a good progress on operational health and safety. We really make sure that we have a safe operational environment within the company, and we measure this all the time. And we must report every incident to mitigate everything that could happen.

And another thing is, of course, diversity and inclusion. We are happy to see that we are now moving up when it comes to our female employees in the company, now at 27%. That is a very good step, and we want to go further also, of course, when it comes to female managers. But we are moving in the right direction. And since we have employed 2,700 people net up during the first 9 months, 34% of that employment is actually female. So we're going in the right direction. I'm really happy to see this.

So last but not least, I already said that at my first slide that we have -- because of the good progress this year, the first 9 months, organic growth of 21% and also good visibility, of course, into the backlog which is now over SEK 200 billion, and we know what we need to deliver the remaining part of the year, we have now said that we will take this step from 16% to 20% growth rate to 20% to 24% instead. So that's our new guidance. And we still retain the other portion, saying that EBIT will grow more than the organic sales growth. And we will generate a positive cash flow and we are confident doing that going forward.

I just want to thank all our employees for doing a fantastic job during the first 9 months and supporting this growth and the commitment to creating societies and having people in societies safe is a strong sort of purpose of the company, which is supported by our employees. I'm really pleased to see that.

With that, I think if I have not forgotten anything, I will hand over to Anna, our CFO.

Thank you, Micael, and good morning, everyone. Yes, as you have heard, we are delivering a strong third quarter especially from a sales growth and EBIT growth perspective. So I think now it's time to dig more into the financial numbers.

And we start with the order backlog. We left the third quarter with a strong backlog, increasing it to SEK 202 billion. In particular, it was the medium-sized orders that increased during this quarter. They more than doubled actually this quarter. So we booked SEK 21 billion. And we have, since the quarter closed -- we booked additional SEK 16 billion in order intake. So the start of Q4 looks promising. 73% of our orders in the backlog are international, and its Dynamics and Surveillance that is the majority of the order backlog, 71%.

If you look at to the left in the graph, you can also see that we are increasing our deliveries from the backlog for the fourth quarter with 35% compared to the last year. And we can also see that we're increasing the deliveries from backlog the year 1 and 2, that is '26 and '27 compared to last year. So that really shows that we have -- we are in a growth journey and that we are also expanding our production capacity to deliver on our commitments.

Let's turn into some more comments on the drivers of our sales and profitability then. And yes, as you have heard us saying, this was our highest sales and EBIT ever in a third quarter. And we have strong sales growth, 17% reported or 18% organic for the group. And the EBIT grew 16% in the quarter. What's also good to see is that the gross margin is increasing in all business areas in the quarter due to high project activities.

And looking in then to more in each business area, Aeronautics, 34% growth this quarter, driven very much from the Gripen deliveries and high activities in the business areas. Also, we see improvements in the commercial business in the sales growth. However, the EBIT is still impacted by the startup costs that we have in the T-7 factory as well as a bit higher marketing cost for all the Gripen campaigns, and also we're starting to do amortization on a capitalized R&D that's impacting the EBIT.

Dynamics, again, continued the strong growth from Q2. It grow 12% this quarter and also delivered a higher EBIT margin, 19.3% in the quarter. And that is a result also of project execution, several deliveries, a mix situation. You know in Dynamics, we had a lot of delivery projects. And in this quarter, lots of deliveries from ground combat that is impacting the margin in a positive way.

Also, Surveillance grew 8% in the quarter. Good project execution and EBIT level at the same level almost as last year. Here, it's very much deliveries from also the Giraffe 1X radar production that's impacting in a positive way, but also good project execution in the business area. However, on Surveillance, we can mention that there are still negative impact from the Civil business impacting their margins.

Kockums, also a high activity level and a very significant growth in their EBIT margin year-over-year. That is very much driven this quarter from both high project execution and, in particular, in their export business. To mention also Combitech, they grow 17% in the quarter. High utilization, high activity, and as we heard, that they are in -- working very much in an area which is growing as well. And their EBIT margin was on par with their EBIT margin last year if we deduct the divestment that we made in the Norwegian operation last year.

And from a group perspective, mentioning also that on a corporate level, we have some corporate costs that are SEK 200 million approximately higher this quarter, and that is something that we expect to continue. It was driven very much of these share-based incentive program but also somewhat higher costs for IT and security as we're growing the company.

The financial summary then. I think I mentioned all items above EBIT. So I think focus more here on the financial net that turned negative this quarter. And the reason for that is mainly because of the revaluation of shares in a financial investment of around SEK 50 million that impacted the financial net, and we had also a lower result from currency hedges related to the tender portfolio if we compare it to last year. This revaluation that I talked about impacting also the tax rate this year. So compared to last year, it's a bit higher. And then all in all, the group net income is in line with last year and as well as the EPS.

Let's zoom out then to 9 months and look how it looks for us after 9 months has passed. On a group level, the sales increased 20% or organic 21% related to effect on currencies. All our business areas have double-digit growth year-to-date. So that's very positive to see. Also our gross margin is improving 70 basis points, and it's all business areas that are contributing to this gross margin increase, but in particular, its Dynamics and Surveillance where we see the improvements.

So after 9 months, our EBIT is up 30% and we delivered a margin of 9.3%. Year-to-date, the financial net is positive. And here, it's supported by the appreciation from currency hedges related to our tender portfolio. And following that, we also have a lower tax rate decrease due to lower share of taxable income from foreign operations. So net income and EPS improvement driven by the EBIT growth and also the improvement then in the financial net.

Next, our cash flow. I think we can say that we have a strong cash flow from operations despite increased working capital that is driven by our business growth. After 9 months, we have generated SEK 7.3 billion in cash from operations. That's SEK 1.9 billion more than last year. Also in line with our sales growth, we are building working capital, and we're doing that in line roughly with the same amount as we did last year. So if you look at the operational cash flow and deduct the change in working capital, we actually have a positive cash flow of SEK 3.9 billion after 9 months.

But as you know, we need to do our investments. That's something that we have communicated earlier in the Capital Markets Day and continue to communicate. It's important for our growth. And we have increased our investments. SEK 4.9 billion is the amount now. That's SEK 1.7 billion more than last year. And so we end up with a negative cash flow year-to-date. But we expect the operational cash flow to be positive this year since we are expecting several large customer payments by the end of the year.

Finally, on this slide, I just want to mention also that it's very positive to see that we are improving our return on capital employed, it's now almost 15%, and that's driven both by our profitability but also by increased return on capital turnover.

Finally, our balance sheet. We have a strong financial position and a solid balance sheet. Our net debt-to-EBITDA is on a healthy level, 0.1x. This quarter, we have a net debt of SEK 700 million, and that was mainly due to that we have a new -- the lease of our newly opened office in Solna here in Sweden, and that's impacting around SEK 1.3 billion in the third quarter. We have cash and liquid investments of SEK 12.2 billion. And during the quarter, we had issued total bonds of SEK 2 billion additionally. Additional to that, we have an unutilized revolving credit of SEK 6 billion. So all in all, that puts us in a strong position to capitalize on future growth opportunities both through increased investments and also enable us to do potential acquisitions.

So in summary, I think a strong quarter both in sales and EBIT across the business. The group has a solid financial position and we have a strong order backlog to deliver on.

So with that, I hand over to you, Johan, to open the Q&A.

Thank you very much, Anna and Micael, for a great presentation. So let's start the Q&A session. And we will start with the questions from the phone conference. [Operator Instructions]

So please, operator, do we have any questions from the telephone conference?

[Operator Instructions] The first question comes from Daniel Djurberg with Handelsbanken.

Then I will go to Aeronautics, I think. You had a good quarter, nice growth. A little bit lower EBIT margin versus last year's quarter, [ 30 basis point ] I believe. But it's still the -- as you mentioned, the T-7A program lingering. Can you both give us an update on this in terms of both the cost or margin impact and also how -- for how long we should expect this to linger and if it will increase in size or the opposite.

Thank you. No, I think when you look at Aeronautics, I would say that a normal Aeronautics with a reasonable scale of Gripen contracts and what have you should be sort of in -- I don't guide, but we talked about this before, sort of high single-digit numbers. So the effect is still there from T-7, absolutely. We've turned around the commercial business in a good way. We're not sort of adding lots of profitability really yet, but it's still okay.

So I would say still a couple of years, it don't -- it won't go in the wrong direction, it will go in the right direction. But before it's actually a good addition to our Aeronautics business, it will be sort of 3 years ahead from now, roughly, I would say. But it will go in the right direction over time, of course.

The next question comes from Ian Douglas-Pennant with UBS.

So I've got several questions but I'll limit myself to one on Gripen, please. Could you expand on the comments that we've read, I think, in the press this morning that you could expand Gripen capacity very rapidly if required? I wonder if you can just educate us on this group as to what we said there and how quickly that could happen. And in order for that to happen, do you need to see deposits coming in before you consider making those investments? Or would you consider investing elsewhere?

Well, as I've said, I mean, we still need sort of set a scenario, that is, if we now get sort of the financing in place, if the politicians sort that and you get support refinancing Ukraine to go into contract on the Gripen E and expanding the production will be important. The way I see it is that, and I've said that this morning that right now, we are looking at expanding production with investments that we've taken to somewhere between 20 and 30 aircraft a year. And of course, as you know, with the numbers that was stated in the Wednesday's meetings, that sort of would add a lot to that.

So that we're looking into that now, how quickly can we take another step because this investment we're talking about is sort of look to be implemented sort of next year and the year after that, roughly get to that level, and then you can take another step, of course. It will be adding more to the Linköping production lines if we do that, and that's sort of a few years ahead. But it would also mean that we would sort of expand our hub in Brazil. And we are initiating, as we speak, other sort of partnership discussions in countries that would have an interest for the Gripen, of course. So this will mean that we would need another hub beyond sort of the hub we have in Brazil and expanding in Linköping as well.

Well, we said that, okay, if Ukraine push the button, we would deliver the first one in 3 years' time, and that is sort of what we commit to. And then it depends on what is the stretch of the delivery schedule with Ukraine and when we have to have this capacity in place. Normally, it takes like 2 to 3 years to get sort of improved capacity in place, I would say. That's sort of the view I have on how quickly we can do this. But there is absolutely an opportunity to implement this.

Will we -- yes, I would like to see sort of a more solidified financing solution in place before we take the big step to start sort of adding huge sort of investment to this. But since we're already moving in the investment direction, we can add a little bit more maybe at risk to actually make sure that we keep the lead times. That's the way I see it without quantifying exactly.

The next question comes from Aymeric Poulain with Kepler Cheuvreux.

Clearly, the demand outlook is great. And it's the third year you're going to be growing at 20% or 25%. So the question is, do you expect that rate to be maintained? Or are the supply chain challenges, especially regarding the staffing or specific material that are starting to emerge given the very strong demand situation?

Well, it's a bit sort of premature to sort of talk about sort of the next years beyond, I would say, this year right now. You know we've committed to a midterm target of 18% CAGR over the time period of '23 to '27. We will come back and refresh -- revisit that, not refresh it, in the year report quarter, I would say, in February next year. And then we will have a new view from our perspective on how quickly we can continue to grow. So that's where we are right now.

If you look at what is the pain points, what's the limiting factors to grow, you are touching upon the right things. We need to bring with us the supply chain and maybe sometimes invest in supply chain. But they have to invest also. To find a whole ecosystem supporting us is absolutely necessary. And there are a few pain points there but manageable, I would say, going forward. And then I am assuming long term, of course, that we will resolve the rare earth elements discussions we have with China and also start to invest to have sovereign capacity on that side. But then we're talking years ahead because that will affect every industry, I would say, if that is not sorted. But yes, that's the way I see it.

Excellent. Thank you. Let's take a couple of quick ones from the web. One is, what's the difference between Gripen and E and F? And when can we see the first Gripen F?

Okay. Yes. We are maybe a bit of nerds using all these acronyms. But as you know, we have the Charlie, Delta version in operations right now. And yes, we have delivered an Echo version as well. The C is -- the E is a single-seat version. The F is a dual-seat version. And we will deliver this dual-seat version to Brazil in '27. So that's where the first aircraft is being manufactured right now. This has been a design that's been done together with the Brazilian industry and Brazil and that is in line with the plan that we have. Sweden has not contracted any dual-seat versions of the Gripen F. I hope I was not too complicated here. It's simple, actually. Single seated version, dual-seated version.

I think it was pretty clear. Another one. You talked a lot about your drone capabilities in your strategy there. How much are you doing and developing by yourself? And how are you looking and doing things with partners? How do you think strategically there what's important?

That's a really good question. I think from a software-defined perspective, we're doing everything ourselves and then, of course, when it comes to sensors and effectors, we have also things in-house. Then we are looking into how can you scale something quickly either yourself, lots of 3D printing or storing, parts that you can actually assemble quickly and how many partners do we need there. So I think on that side, when it comes to platforms, there will be more partnerships. But it's a bit different depending on what kind of drone you're talking about, of course.

Good. Excellent. And we had a quick one for Anna. Do you expect your backlog to continue to increase going forward?

With our growth that we're foreseeing, I think that is something that we can assume that today's backlog will increase going forward. Yes.

The next question from the phone comes from Björn Enarson with Danske Bank.

Yes. On Dynamics and the super solid backlog and -- but the mix is very, very important. Can you give us some color on how you look upon the mix situation in the backlog? As profitability can swing quite a lot. We have seen that over the years depending on what Dynamics you have.

In the Dynamics area, you mean.

Exactly.

Well, I think I won't go into exact details on the mix as such, but of course, it's quite dominated today by support weapons and missiles. Both have a substantial backlog in that and both will add good profitability numbers. I will sort of -- we have always talked about what's the ambition level in terms of sustained EBIT level on Dynamics side. And I've always said that depending exactly on the question you asked, the mix between the different portfolio entities in Dynamics, but it should be always sort of in the mid-double digit numbers, around 15%.

Now we've had good quarters now. So we are above that. And of course, that's very nice to see. But it will always be on that level, so to say. But I won't go into exactly a part of the SEK 87 billion, what's what there. But the main parts are absolutely support weapons and missile capability, and you can probably sort of draw that conclusion from contracts that we have received.

And it varies, of course, between different contracts, also within the same business unit within a Dynamics. So it differs. So that could also impact. But I think it's a good, as you say, Micael, in the mid-teens mid-15s, what you say...

Mid-double digit numbers, the number between 10 and 20, not sort of between 10 and 100.

The next question from the phone comes from Carlos Iranzo Peris with Bank of America.

I just want to ask on the GlobalEye because it looks that it's having a strong commercial momentum recently. So can you help us to understand how big the GlobalEye opportunities could be for you midterm?

Well, I mean, this is one of the mega deals that always will take sort of a Prime Minister or a Defense Minister to decide in the end. But I mean, we have campaigns ongoing. As you know, France have selected and they will start with 2. We have 3 in production for Sweden. There is an interest for a number of aircraft when it comes to Germany and NATO. We have a couple of interest also in the Middle East. So it adds up to a number of platforms with a strong potential.

But I would hesitate to sort of bring too much of mega deals into our growth. And this is not part of our growth this year or sort of a big portion of our business plan going forward. We look upon mega deals in a careful way. They are adding substantially when they happen. But it has to be continuous growth anyway. So I just want to say that, yes, there are many platforms that could come into play, but I wouldn't sort of jump into conclusions because they are megadeals campaigns. And political decisions will also be involved in that. But I look very positively upon sort of the future of GlobalEye. That's what I can say. And I mentioned a few countries now that have an interest.

The next question comes from Tom Guinchard with Pareto.

A question on the risk guidance here. Any changes in delivery pace across the different business areas? Or what's changed since your last guidance? If you could break that down, please.

Well, I think everyone is actually picking up nicely when it comes to expediting deliveries and pushing sort of things from the backlog into sales. And also some of it is connected to that we get our capacities coming into place. And also seeing, yes, that we have added 2,700 people to the company net up this year adds lots of push into this. And we are sort of optimizing our way of working and automating production.

So it's a number of things that comes together that sort of had lacked visibility in the beginning of the year. But now we are more confident that we have actually succeeded in many things that we put ourselves forward to do. So it's actually in all areas. And of course, I mean, Dynamics is growing dramatically. You see 36% growth over the first 9 months. So it's an engine in this. But also the other business areas are growing, and there's lots of potential in Surveillance, and Aeronautics have now really stepped up in terms of growth.

So I wouldn't sort of point something specific, but you can see from the numbers 9 months now what's driving this and what comes into play first.

The next question comes from Sasha Tusa with Agency Partners.

It's Sash Tusa here. I've got a couple of questions. First is just to R&D. On a 9-month basis, it's doubled over the last 4 years. Going forward, if you have investments, particularly in counter-UAS, do you expect continued growth in R&D? Or is there just going to be a shift in the mix probably towards the counter-UAS area and away from other areas? I wonder if you could just give some color on how the R&D is expected to develop.

No. What I can say is I want to grow the R&D investments as much as I can but still keeping to the guidelines that we have, the trade-off between sort of here and now, top line growth, increasing our profitability but still having the strength to grow our investments in R&D. And we need to do that when it comes to AI, autonomous systems in all domains and also, of course, in the way we develop software.

We have established a common tech organization that is pushing sort of software out on the business unit in a different way with sort of solidified architectures and stuff. So we need to continue to invest, make no mistake. So if we continue to grow, it will not only be a mix and shift in that, so to say. We have to do a number of things going forward in all core areas both when it comes to sort of autonomous systems in the air, which we call collaborative combat aircraft, the unmanned underwater vehicles. We have, as you know, a collaboration with General Atomics to do an autonomous sort of airborne early warning capability.

So there are a number of things that we have to do and which I look forward to do. So it will continue to grow. But I won't quantify it how much. It is always this trade-off between the different pieces I mentioned.

Just maybe I can add. We have also some capitalized R&D that we have started to depreciate now that is also impacting. And that's something positive because we are delivering in our projects and, therefore, we can -- we depreciated the capitalized R&D. So that's also going to increase during the year.

Excellent. Thank you. The next question -- sorry, did you have a follow-up there?

Yes, please. That's helpful. Yes, I just wondered if you could elaborate on the Luleå frigate program, which seems to be in a degree of flux. You clearly said that it's now more of a frigate than a corvette. Corvette was probably a bit of a euphemism anyway. But could you just give us some color on where that program is? And in particular, the reported bid by France to export frigates directly to Sweden, possibly as part of the offset for the GlobalEye program, how do you see that developing?

I think it's a question you should ask to Swedish customer mainly. And I want to underline it's probably -- I mean, it's probably corvette, of course. I mean, maybe it's my ignorance. But listen, we have put forward a very strong offer together with Babcock, our main partner here. And I hope that, that will prevail and be the selected thing.

Yes, the Swedish customer has opened up, as I know, for other sort of proposals. And it's up to them now to select. But I still think we and Babcock have the strongest proposal. Now it's up to the Swedish Navy, Swedish FMV, the defense material organization to make a selection. And exactly when that is going to be done, I'm not sure. But time is of essence, of course, since they want the frigates to be operational sort of '29, '30 something.

The next question comes from Marie-Ange Riggio with Morgan Stanley.

The question that I have is on your current capacity expansion. Clearly, we see that 25 is quite a record level for you. you announced some capacity expansion at your last CMD mainly for Dynamics and Surveillance. I'm just wondering, given the level of backlog that you have today and the demand that you are seeing in the coming years, are you already increasing further the capacity compared to the guidance or like compared to the indication that you gave at your CMD? Or you are still expecting basically the orders before like moving forward from those targets?

I would say for the year, we are in line with what we talked about at the CMD. It's not sort of a walk in the park to get everything executed. So that is really sort of a high ambition to invest all that money into capacity increases that we talked about. And we're looking into what do we need to do next year, of course. And we'll come back to that next year.

But we will continue to invest in capacity increases, obviously, because of the demand in the market. But what are we doing right now is supporting what we talked about in the support area going from sort of below 100,000 units to somewhere in between 400,000 and 500,000 units when we get all the capacity in play. And I look forward to getting the factory in Grayling, Michigan up and running in the end of next year and also then India, of course, to add to this.

So we'll come back on that, but we will see more -- again, we stick to our guidelines. But we will not compromise, making sure that we have the capacity to support the demand in the market and not compromise to make sure that we invest in the right technologies to be relevant all the years to come. And this is the sort of the puzzle that we work with all the time to make that sort of really efficient going forward. But we will need more capacity investments, absolutely. But we'll keep to the CMD statements that we had.

If I may, on that, I mean, are you afraid about the lead times for your policy? Because like -- are you afraid basically that the lead time about increasing the capacity can limit further growth going forward given the fact that, I mean, it will take time. If I'm correct, you have drone combat where you can increase the capacity pretty quickly. But for the rest, I think that takes a bit more time. So that's why I was saying like if you are trying to be ahead of the curve in terms of adding capacity because clearly, the backlog would support further growth or not. Can you probably just remind us a bit the lead time for any other projects that is not ground combat if you increase the capacity?

If you talk about the lead times to get increased capacity into play when it comes to ground combat, it's like roughly 2 years. So we started early, fortunately. But there are different movements. As I said, there are 40 building projects ongoing in the Karlskoga area only. So they are not in the same sort of schedule as we speak, all of them. But it's roughly to get to full-fledged sort of big step-up on the capacity of support weapons, I would sort of simplify it to say it's roughly 2 years.

Excellent. Thank you very much for the questions. I think we need to move on to some of your colleagues. But just take one question from the web here. Micael, in your CEO statement, you write right that Colombia has selected the Gripen and that you are in negotiations. Do you dare to set a time frame here? Or how should we view that?

As I said before, I hope to conclude that during this year. That's sort of what I've said before. I'll stick to that. I won't give a week or a month or so, but we've been doing good progress and I'm pleased to see that. So I hope we will conclude this year.

Good. Another one is on your drone capabilities. Should we start to see that, that also can be some larger orders here? Or will it be more of test and trials and so forth? Or in the future, would you see that this can also grow to more products and bigger-sized orders?

No, I anticipate that to happen because I think also looking at what capabilities the commission has stated as flagship projects, if you want to implement that, of course, you need plenty of counter-UAS systems. And if you want to have another capability sort of more aggressively, you also need quantities. But we're not really there yet, but we're seeing contracts coming now. So I think that's an avenue that will grow, absolutely. But exactly how and when it's -- I can't say. But we're in that race.

Good. Okay. I think we have a number of more questions over the telephone conference so let's spend the last 5 minutes there. Please, operator, next question.

The next question comes from Renato Rios with Inderes.

This is Renato of Inderes. Congratulations on very good results today. Great work. It's similar to the question that was just asked regarding drones and AI. Looking ahead to, say, 2026 to 2030 or even beyond, how do you see drones technology and AI-driven unpowered products and systems moving from development to sort of recurring revenue and contracts? How significant a share do you think this could become in the medium to long term? And would be interesting to hear your view on the revenue mix, how it could look like across the ground, air and marine domains and the largest product categories.

Good questions. I think looking into the crystal ball and trying to understand how quickly AI and autonomous capabilities will take an operational role and great quantity is really a difficult one, I must say. It's all connected to also the end user, how quickly are they prepared to change a bit of their concepts of operations from doing what they're doing now to using these capabilities in a new way. I mean, it's different looking at Ukraine, which are moving really quickly ahead with short iteration cycles, upgrading the drone capability on a weekly, daily basis, very decentralized to keep trying winning the war. And they take a bit of a risk, of course.

It's different in an environment where you change the CONOPS of a defense force or an army to do things. It will take a little bit of time, I think, but it will definitely prevail and be there going forward. Technology was developed much quicker than I think we understand. And how much you can do on an autonomous basis and how much support you will have from AI agents, agentive AI going forward will be tremendous. But to quantify the share is -- I can't do that today. I have to make sure that we are part of that journey and that we invest in that going forward.

Between the domains, I think the land domain will continue to grow and will be substantial if you look at the company from our side. Maritime and air is a bit sort of dependent on the mega deals, of course, a bit different in that domain. But then it will be a sustained business, of course, in the background as well. So I think land domain is more sort of sensors and products and weapons will continue to grow. And also, we hopefully will continue to grow a lot in the air domains as well. But that will be a bit dependent on the mega deals, honestly.

Excellent. Operator, do we have a final question from the telephone conference?

Yes and It comes from Afonso Osorio with Barclays.

I just wanted to come back to this Gripen deal with Ukraine. I mean the 100 to 150 jets is a massive potential order here. So firstly, what will be the total length of these contracts, assuming the delivery starts 3 years from now, as you just said? And then what would be the profitability of that contract compared to the other contracts you have within the Gripen family?

Good questions that I'm sure you understand I can't sort of nail that down completely. But I mean, I've said before, I mean, that size of the contract would of course create scale and improve the profitability of the Aeronautics domain. Then it depends on many other things, what kind of availability do they need, what kind of flexibility and agility do they need, ground support equipments, training and all of that in terms of the whole contract. But you can sort of look at Brazil and then you do your mathematics on what sort of 100 or 150 contract. It's in that ballpark, but it depends on the number of things that we haven't nailed down yet to look at the size of the contract.

But everything that adds that scale to the operation would, of course, add profitability. That's for sure. But I won't sort of say how much today. That's not sort of possible. We will start working this now and look what the expectations are from Ukraine comes to schedule, delivery rates and when the first aircraft needs to arrive and then offer them something that needs to be discussed. And apart from that, all these things around financing must come into play as well. So we will work that diligently, of course, no question about it.

And I look forward to it.

Can I say one thing before we end, which I forgot actually. You've seen probably the press release that I just want to say that we have now appointed a new position in our corporate management, strategy and technology. And it is Marcus Wandt, who is a great technology guy and a visionary guy, a good leader that will take that role. And we do this because there are cross-company initiatives that we have to have a thorough discussion about in corporate management and all the initiatives that comes from me or NATO, of course, as well. But technology is moving so fast. So we need to be sure that we have the right discussion in corporate management. So I look forward to welcome Marcus Wandt 1st of November to my corporate management.

Thank you very much, Micael. And with that, good ending. We finalized this call for the third quarter, and very much look forward to the Q4 call that we will have then in beginning of February. So thank you again very much for listening in and also joining over the web. And if you have any further questions, do not hesitate to reach out to us at the Investor Relations department. And have a really, really nice day. Thank you.

Thank you.

Thank you.