Good day, everyone, and welcome to Saab's Second Quarter and First Half Year Results Presentation. I'm Merton Kaplan, Head of Investor Relations. And with me today, I have our CEO, Michele Johansson and CFO Acting CFO, Thomas Hendel. So before we start the presentation, I would like to remind you that we a Q and A afterwards, where you can we'll take questions from the audience, both from the teleconference and also take your questions that you post online. So yes, you can, during the presentation, post the questions through our IR website, and we'll try to answer those questions afterwards.
So with that, I'll hand over to you, Mikael.
Thank you so much, Merton. Welcome, and thank you for joining us today. I'll walk you through the Q2 report and also the first half year of 2020. I must say, it's still unusual times. I guess, this quarter has been one full quarter of the full effect of the COVID-nineteen that has been in play.
And I will come back to comment about how that has affected Saab as well. But let's look at some of the highlights for the first half year then. I think I'm really proud of the order intake situation. I think we had a really strong first half year with a 45% increase in order intake. And also for the second quarter was a really strong quarter with 76% or 77% increase compared to the second quarter last year.
The growth of the small orders have continued, which shows that we have a high activity Have a very We We have have a a very 5% quarter. Growth compared to the second quarter twenty nineteen. And five out of six business areas showed growth. We've had effects on the civilian side of the operations, and I will come back to that in a second.
We had solid performance. We have earnings development, which are absolutely in line with last year. And also for the second quarter, that was in line with second quarter last year. I think we have had the defense contributing positively, compensating for the problems we've seen on the civilian side. And on the cost reduction side, of course, we have been working a lot to mitigating the effects on the civilian side where we had to reduce our activity due to the airline not the airline industry, but the industry working with aircraft deliveries, which we are affected from.
We are mitigating the cost situation on that side. But also, the OpEx side of costs have been reduced considerably during the second quarter. And since we have grown, we have, of course, then been able to continue our execution of the major programs according to plan, which is really, really important to us. But also when it comes to the cash flow and payments, those programs are essential to us. So a few things on the execution side.
I'd like to mention our delivery of the first GlobalEye to UAE in April, a very strong milestone, which involved sort of a new way of delivering a system since we couldn't actually perform the tests in country unless we had our personnel in quarantine for a couple of weeks. We had a fantastic team doing that, staying in quarantine and then doing the test for a week and then being able to perform that milestone, which is also connected then, of course, to payments. We have been flying our new technology on the radar side and done a number of air trials on the Gripen CD, which is the absolutely state of the art electronic steered antenna technology. And that is now ready to be implemented in future platforms and also, of course, upgrades for the CD platform. We have done tests on the very important lightweight torpedo boat from a Gottland class submarine but also from Wisbe Corvette.
And we have checked a number of things now, and that is going according to plan. And we have two important contracts with Sweden and Finland regarding that lightweight torpedo. And you read a lot of the situation in Brazil, but actually, we have been continuing our activities according to plan in Brazil as well. And we have now started the production of essential parts of the fighter Gripen E and the dual seat, the S version in Brazil, the forward fuselage, the aft fuselage, the tailcone and some parts of the wings as well. So that is up and running and will be an essential production site for us going forward.
One extremely important thing that we have completed now during the second quarter is the divestment of the our shares in our joint venture in The U. S. On the three d mapping technology with the Reichen company. That was something we entered into in 2015, and we have now exited and capitalized on that technology development, well, in a market that we couldn't access, but we have capitalized on that. And still, we have the technology in our house to continue on our applications on the defense side.
So that is a big achievement, I think. And then we have an important program on the Combat Systems side in The U. K, our relationship with U. K. Industry and under the MoU between Sweden and U.
K, and that is moving ahead really well despite COVID-nineteen and restrictions in traveling. And we will now enter into a situation where we will discuss a trilateral partnership with the Italian industry as well. So it's been an intensive first half year and an intensive quarter, which I'm really, really pleased with. Looking at COVID-nineteen then to give you some updates on that. I sort of alluded to that.
We have had limited impact on the defense side, I must say. We have all the sites in Sweden more or less up and running according to normal standards. Our employees have been doing a tremendous job keeping our operations up and running. Of course, we have followed all the recommendations and guidelines and restrictions that our authorities have provided, and the health of our personnel is the primary thing to work with, of course, but that has been going really, really well. We have had sites outside Sweden under complete lockdown.
For example, Germany and South Africa was out for weeks on the defense side, but many other sites have been working according to plan. So we have been able to continue to work on our major programs and delivered, as I said. On the civilian side of our business, which is roughly 15% of Saab's revenue, especially related to aviation industry, our aerostructures organization in Linkoping and also our systems on the what we call our traffic management systems for airports and navigation service providers. Those have been affected dramatically. And as you can see in our numbers, our business area IPS have been affected a lot.
We are now taking mitigating activities, of course, to make sure that we can reduce our cost situation in those areas and essentially move personnel from the civilian side into the defense side and sort of lower the number of consultants from external companies that we have in the organization. So we try to mitigate it that way. We are working hard on the supply chain side of things. We are not just in time type of company. As you know, we have substantial stock to work sort of short term with our major programs.
But we have to make sure that they are up and running to deliver to us for years to come. So this is a very complex material. And some companies are, of course, up and running again reasonably well. Others having problems in different parts of the world, and we have a global supply chain. So this is a a key thing to work with for us going forward.
We have worked a lot, of course, with the financial flexibility during the quarter. And we have a strong financial situation now with the credits we have available and also cash. So and also, we as you know, we the Annual General Meeting decided not to do a dividend as planned for this year. And that is something also affecting our financial flexibility, of course. So we're doing a lot of mitigating actions.
But generally speaking, we have been doing quite well apart from the civilian side. Some market highlights. Well, I would say that I haven't seen any signs of that our customers are refraining from continuing their procurement programs acquisition programs. And that is also shown through our strong order intake situation. We have concluded contracts and have a good order intake.
Many of these things were, of course, initiated before COVID-nineteen. And fortunately, we have a strong marketing organization and many own employees in many different countries around the world that can continue to have interaction with our customers. That has led to the order intake. Business development is a little bit more difficult, of course, but we're doing that as well as far as possible. It's hard to predict how things will go, but I can't see any changes in the marketplace in terms of that countries will avoid continuing with protecting their societies and protecting their countries.
And the geopolitical situation is not going really in the right direction. It's actually becoming a bit worse during the COVID-nineteen. So I see still our prospects being extremely valid going forward. But we have seen commercial market activity, of course, on the airline side have dramatically been reduced, of course, but that is a limited part of Saab. A number of good things have happened during the quarter.
We've signed a new airborne early warning contract, a big one, and that is important to us. We have framework contracts for the shoulder weapons and support weapons side, both in The U. S. And in other countries, and that has been successful to us. And we announced yesterday that we had a new contract from The U.
S, almost SEK $1,930,000,000, which is fantastic. And that framework contract is SEK 4,500,000,000.0 in total, and this was the second lot that was ordered from that. We've also had a couple of important support contracts in Sweden, both for the Gripen and but also to the extension of the training aircraft, SK 60, that will now continue to be in operations until 2025. And we have also had good contracts in The U. S, being a country that actually moved things forward a bit to support the defense industry in that country.
So we've had not unexpected but earlier radar orders than what we thought would happen during the quarter. That is really good. Yesterday, we also announced another contract on the Bonaire warning side, the support contract for the GlobalEye in UAE. That will be registered now in Q3 and not in the second quarter, but that is also a big win to us. So in sort of summarizing what this means in numbers then, looking at the first half year to start with, really good order bookings, 45% up, as we've said.
And the sales is in line with the first half twenty nineteen. And also, the operating income is in line with the first half. So the first quarter this year was a little bit down, but the second quarter is a bit up. And all in all, we came to sort of the same level as 2019 despite the sort of the effects of COVID-nineteen. And operational cash flow has improved dramatically.
As I was commenting also after the Q1, we were seeing sort of an improvement also in Q2, which we have seen. Now we will go into a little bit more detail to clarify exactly how the underlying cash flow looks like in a minute. If we then continue to the quarterly development, this is a very From a revenue side, I would say it's one of the best ever for Saab, if not the best. And also when it comes to order bookings, extremely strong quarter.
And that is the same for the operating income. Operational cash flow, a big shift now to positive 1,800,000,000.0 positive operational cash flow. That has, however, been affected by the deferral of tax and social fees that's been available for us from the Swedish government. But even with exclusion of that, we have SEK 600,000,000 positive operational cash flow for the second quarter. I will reiterate that even if we have said again that we will not give an outlook for 2020.
We stick by our judgment that we made after the Q1. It's difficult to predict, again, the effects of the COVID-nineteen in different countries and markets. And the supply chain specifically is something you have to work with in a meticulous way now going forward. But we do stick by our long term financial targets of 5% organic growth and 10% operating margin, definitely. And our strategy remains.
It's built upon a number of perspectives where our employees is the most important one, of course. But when it comes to our portfolio, I think one development that we have done now is then to divest our shares on the Raikon side, which is about portfolio management, of course. But also, we continue to make sure that everything we do on the portfolio side is connected to our core areas going forward. So that initiatives in taking decisions on what is actually core to us continues as well. On the international expansion side in the marketplace, the strategic partnerships on the future combat air system is really important to us, and we're taking new steps in that direction now when the FCAS project, together with The U.
K, is intensifying. We have also then, as I said, started our market footprint to a larger extent in Brazil with our production up and running now in Brazil going forward. Automation digitalization is absolutely key to us. We work that every day. A new technology will mean a lot to our core systems and core areas going forward.
And we are on our toes investing in these areas continuously to make sure that we can do things with our core systems in a new way using new technology. So I just wanted to reiterate that this strategy is in place, and we have lots of initiatives following our strategy pushing forward, and we stick by our long term financial targets. And with that, I think I will hand over to our acting CFO, Thomas Hendel.
Thank you, Mikael. Let's go into more details on the financials. We had a solid performance in the defense related business for the first half, especially the second quarter, as Mikael has said, and that is, of course, the majority of the business. We had a good order intake in Q2, billion almost compared to the SEK9.7 for the first half, which is the 45%. Also, normally monitor very much and follow-up the small orders.
And now we have 9% up for the half year versus the half year of last year. And it's also in second quarter as such is 14% up actually. So it's very good. We have sales, which is very much in line with last year despite the drop in the IPS business, I. E, the civil business.
And we have the organic growth in the second quarter of 5%. And then we have stable earnings and in the both quarters and so for the half year, coming from the positive volume effect in the defense side, but also impact from cost reduction actions that also Michael mentioned, and that is both in the cost of goods sold area and also OpEx. We have an improved cash flow in the second quarter, and I will come back to that in a minute in more details for the analysis. And we have a strong financial position. We acted early end Q1 and early Q2 to secure the liquidity in the light of the COVID-nineteen situation.
And also that we signed, as you might remember, an extra revolving credit facility also around that timing. Backlog duration, which is a KPI that we closely monitor, it's very important for us, of course. We have to execute the rest of the year, billion to add to the first half of sales. And then we have also, as you see, starting to strengthen our backlog now for 2021. So that is also going to plan.
Order size distribution, we have already talked about that. But what I wanted to point out with this slide this time is actually that we are now approaching the book to bill ratio one, as you see, and that is quite some time since we were close to the one on the book and bill ratio. Order bookings by business area, once again, the strong growth, encouraging that we increased the volume both on small and large orders. And the growth is very much driven by Dynamics, Surveillance and Support and Services BA. Sales, stable volumes year over year, stronger Q2, 5% up in Q2 in and that is actually five out of six business areas that shows growth in the second quarter.
High activity level from our backlog and also encouraging to see what we have said earlier here that dynamics is starting to pick up in their deliveries, which is very important for us in the second quarter. And then IPS, there we see the downturns, starting to see that even if Combatec made a good performance at the end of Q2. Operating income, much affected now in IPS, it's very obvious in this slide. Strong improvement in Dynamics and Surveillance. And also that we still and we need to mention aeronautics and support services at a high level, stable level according to plan.
And also, we have seen despite of it still on a low level, but we have productivity measures implemented in Kokums and where we also see starting to give effect. Cash flow. Yes, we are improving. We have improved cash generation. We had a good collection in the quarter, mainly from meeting payment milestones and deliveries in our major programs.
We have then lower levels of working capital and now starting to see the POC receivables slash contract assets starting to decrease, as we have mentioned quite some time now. Then we have this, let's say, onetime positive effect from the deferrals that Mikael mentioned. Continued investments on a pretty high level on both fixed assets and capitalized R and D investments, which is according to plan, of course. And then further deliveries are planned for 2020, which is a key for us to generate cash flow. And we reconfirm that we have a continued ambition to generate positive operational cash flow for 2020.
And here, I'd like to stress that this is without any one off effects from the deferrals that we still reconfirm our continued ambition on the operational cash flow side. Should also mention that we the cash from the Rycon divestment was actually received after the Q2 closing about SEK1 billion. The net debt situation is pretty much stable, basically reflecting the free cash flow for the first half year. And we have and the net debt of SEK7.4 billion, you should then we should see that we have out of that the net pension obligation is actually SEK4.8 billion out of this SEK7.4 billion, which is important information. The equity asset ratio is strong, 36.2%, which is actually one of our long term targets as well to be ahead of the 30% equity ratio.
And then we have an improved cash situation now where we have the SEK10 billion on unutilized revolving credit facilities. And when we end of Q2, we also had cash on about SEK6.3 billion. So finally, focus, like always, execution, deliver of projects is key for us. We need to secure targeted orders in certain areas, continue to productivity measures and manage cost and growth and the cash flow generation, mainly from meeting the payment milestones in the large programs, but also increased deliveries in our product business. So by that, I think I'll leave over to Marjorie.
Thank you very much.
Let's thank you, both of you, Mikael and Thomas. So now we are ready to open up the floor for questions and do some answers. And I would like to actually start before I start, hand it over to the moderator. I would like to, as usual, remind you that for those who are going to ask questions, I recommend to ask one question at a time. And if you have more follow-up questions, please come back to the line so we can answer those two and give everybody a chance.
So I think we're ready, and we give the moderator to open up and take the first questions from the teleconference.
Thank you very much, Mr. Merchant. There will be a brief pause while questions are being registered. So now we have the first question from Mr. Sesh Tusa from Agency Partners.
The floor is yours, Mr. Tusa.
Thank you very much. I just wondered whether you could talk about the timing of the tax and other social fees deferrals. Clearly, that's a tremendous benefit in this quarter. But I wondered when you would expect to pay those because it's clearly not a you're clearly not being let off that particular obligation. Is that something we should expect to see as a cash outflow next year?
Well, I can start, and maybe Thomas, you can comment in detail. But I mean, the rules for that is that deferrals that we have been entitled to use for this quarter can then be paid back in a year's time. But it's important and exactly when we will do that, I will not comment upon, but it's important to state what Thomas just said that we will absolutely have the ambition to generate a positive cash flow without sort of taking that into account, having these deferrals this year. So that is as far as I would go right now.
Next, we will have a question from Mr. Douglas.
Hello, gentlemen. Hopefully, you hear me. A question from my side. I wanted to you already mentioned Brazil, but can you give us an update on the other large programs that are running, please?
Well, I think if you start with the Gripen side, we're doing really well. We haven't sort of said that much about that, but we have now started to fly another aircraft during this quarter, and the program is running well. Now we're adding sort of tactical functionality to the program. And we are going to deliver the first aircraft to Brazil this year into Brazil, and then they will continue to get a few aircrafts next year. And also, the Swedish deliveries will start.
So I'm really pleased with that. The GlobalEye program has been running absolutely according to plan, and we have achieved our milestones, as we've mentioned. We have the T7, the training aircraft in the together with Boeing in the industrialization phase that is ongoing will now lead to the first delivery of our aft fuselage part to U. S. During the fall.
And then from the end of next year, we will start sort of doing outputs from our production facility in West Lafayette, Indiana, also going really well. And the construction is going according to plan. So I've seen the pictures. I can't travel right now, but I've seen pictures of walls and roofs and the inside of the building, at least. Apart from that, we have the Squadron twenty twenty, the command and control in the sensor side with the Finnish Navy also running according to plan in a very good way.
So I would say program after program, and I think the quarter shows that, has been running according to plan, and we have met our milestones.
And the A26?
Yes. Of course, I didn't avoid that on purpose. No. I mean A26 is a program that is going now from development into industrialization and production. And activities in production have increased dramatically during the quarter.
I visited twice myself now, and it's looking really well. We're not pleased with the profitability of Saab Kokums, and the new management have initiated a number of activities to improve that. And we start seeing effects now in a very positive way, I must say, during this quarter. And you might know as well that the defense forces have taken delivery of the first Gottland class submarine during the quarter as well. So we've delivered well on that as well.
Next, we have Ms. Anesta. The floor is just Ms. Anesta. A
question from me. And I missed the beginning of the presentation, so apologies if you touched upon that. Regarding the order momentum, you have seen quite good order intake in the past quarter. What is your outlook for the rest of the year? How are you doing?
Do you see any hesitance at governments with regards to spending on defense in an environment where they need to put some money on kicking kick starting the economies? So starting with that?
No. As I said, I think I haven't seen any signals or heard any signals on that they will avoid continuing with the acquisition programs with the customers that we are approaching. On the contrary, some customers are actually moving things forward in some countries. And so I think the marketplace is still very active. I mean there is a slight problem getting face time with the customers, of course.
So that's why it's so important to have people at sites, so to say, internationally to work with them. It's a bit frustrating not being able to travel the same way as usual from our main hubs. But I would say that countries seems to be focusing on protecting their societies and protecting their countries and continuing with the programs that we've seen. So we have many prospects still to work with during the remaining part of the year and going forward. And we have large campaigns as well, like the Gripen campaigns in Finland and Canada and also, hopefully, continuing with the Gripen in Brazil.
So the market activity is really high. I can't see any signs of that sort of going in the wrong direction.
And just a follow-up. You signed the support deal with United Arab Emirates for GlobalEye. Is it a sign that you're also progressing when it comes to the their intention to buy new equipment?
We are continuing our discussions on that, and they're going in the right direction. On sort of the additional aircraft, yes. That and I hope hopefully, we will be able to conclude that, but I won't sort of soon, but I won't predict any specific date or month, but definitely in play. The support contract is an obvious thing, of course. We have started our deliveries.
The first aircraft is in country. The next one is imminent. So they need a support setup, of course, in UAE. So that is connected to the deliveries we're making now to have the availability of the aircraft every day to fly it. So it's been sort of a tough negotiations, of course, but it's something that they needed.
So I'm pleased that we have concluded that now.
Next,
we have a question from Mr. Rafael. So the floor is to you, Mr. Rafael.
Good morning. Hope you can hear me. Yes. A question regarding cost reductions. You mentioned that you have done this during the quarter.
Can you say something about how much you have reduced the costs, summarize what you have done and how much is temporary and how much that could be more lasting?
I can answer start to answer it, least, Mike. We have I mean, we see basically two areas of our cost reductions. One is obvious that is to try to compensate the volume decline in the civil business and the IPS. And that is more to balance the, obviously, volume cost. The other one is, of course, that we have both temporary, as you said, Michael, and sustainable cost savings in the OpEx area.
We have a low activity level now on the market side. That is one of the maybe at least somewhat temporary effects. But we have also worked, of course, with our structure and our corporate cost overhead as well. So I would say these are the one is to compensate volume, the other one is to try to increase efficiency. And I don't mention any specific numbers on the reduction.
Next, we have Mr. Douglas for his question.
Hello again. A follow-up question from my side. I wanted to focus on Dynamics. I wanted to understand if there were any COVID-nineteen issues weighing on profitability in the quarter, such as potential delivery issues. I clearly see that margins are very strong, and I just wanted to understand if they could have been even stronger in the quarter, especially now that the backlog is so solid, which sort of indicates to a strong H2?
Well, I can comment on that. I mean, Dynamics is in a very sort of much in a growth situation, as you know. And we are sort of boosting our production capability now to manage all the contracts that we have received. COVID-nineteen impact, well, there are impacts in a way that some customers will not allow sort of a digital final test sort of procedure, and some customers will. What I mean is that we've tried to sort of implement a new way of delivering things by having either support from the Swedish authorities witnessing our test in Sweden, and then the customer will accept that and we can ship.
And that is and we broadcast it sort of live. That has been accepted by many customers, but not all. So yes, there would could have been sort of higher deliveries, yes.
All right. Thank you, Moderator, I have we received a couple of questions from the web. So do you allow me to take them now, please?
Yes, please. Thank you. Please proceed, Mr. Mursten.
Thank you. So we had some interesting questions also from the website, both from investors and analysts. So and I would just go a few of them from the rate of order here that we received them. I think here, we have David here from Bank of America. He wants to confirm that you're targeting your ambition of positive free cash flow for 2020.
And I think we partly answered that question, right? Do you want to add?
Yes. Definitely confirmed or reconfirmed the ambition on operational cash flow. But even as we define a classified free cash flow, the answer is yes.
And he would actually also want to understand a bit more the factoring of receivables that we've done. Are we planning to do that also going forward? That's the question.
To use the receivables?
The receivables, yes.
The receivable program. Yes. I mean, we have used it in some of the quarters from a cash planning point of view. And I wouldn't say that we should totally avoid it, but our assessment is that we, for the moment, we are not utilizing it.
And then maybe also a question to you, Mikael, here about the supply chain that we mentioned here about the risks. What's the main pressure so far that you've seen from operational perspective?
Well, I think, as I was trying to explain, I think we are not just in time type of company. So it might not be that it's absolutely here and now that we don't have the inflow of certain components or goods. It's more sort of related to a bit more long term, could be sort of two, three years from now. So we're monitoring whether all the players will come back as sort of suppliers because we do see that some are up and running to 25%, 50%. And the backlog that they have from many customers from their side is quite high.
And so we might have to sort of find other suppliers sometimes or work with them to make sure that they can deliver according to plan. So we take all kinds of initiatives to make sure that, that will also be secured for the future. But it's different in different countries. I mean we had weeks of sort of complete lockdowns where companies may not even have answered the phone, so to say. But now most of them are actually up and running again to some extent.
That's good to hear. That's very good. We have a different type of question and more related to Gripen here maybe, but we have one person here from Finland, it looks like. Are you expecting Colombia to make fighter selection by the end of this year? Do we have an answer to that?
It's difficult to answer that question in a we're following the process. We have offered things. We have we are in cons with them. They have to make sort of political decisions to go ahead, and they review now different proposals. From through a formality perspective, they set up a rather quick process that would sort of could lead to a decision before the end of the year this year.
But whether that will will they be able to stick to that, that's really difficult to say. But we are in the game, absolutely.
Thank you. We have a private investor here from Germany, who is wondering how happy is The UAE customer with the GlobalEye? And what's the status of the follow-up contract? Can we add something to that?
Obviously, I will say the customer is very happy, and that's absolutely true. I mean it's been a successful delivery, and it is a fantastic capability, a surveillance capability. So we're really pleased with that. And we have concluded the support contract on that. And we as I said, we are in discussions continuously on the next sort of aircraft that they announced in November that they will acquire.
So that is still absolutely in play.
Okay. Good to hear. Bjorn Enachon here from Danske has asked sent a post here asking, what are the main COVID-nineteen risks for you? And what's the impact from COVID-nineteen during Q2? He says he missed first part of the presentation.
As I said, definitely, obviously, it is the impact on our aerostructures activities, where the sort of production rates have been reduced dramatically because the requirements from the aircraft industry has gone down dramatically. So that is obviously the biggest one, and it's difficult to predict when things will get back to normality from the airline side, as you've seen. I can't do any other prediction than what I read, and it will take probably years before we see sort of the same level of production rates from the big aircraft companies. Then so that's an area. And then we've had, of course, traffic management, air traffic management systems, where we deliver command and control systems to the air navigation service providers and airports to manage their traffic in the vicinity of the airport to optimize that.
And that has also been affected rather dramatically. So that's the most obvious thing. But also, of course, on in the defense side, which is not really visible now since other parts of the defense side have been quite successful, we've had complete lockdowns of our operations in South Africa and in Germany for weeks during the second quarter. So there are effects also in the defense side. I cannot predict.
I don't have the crystal ball. Will there be second waves in some countries? Will there be eruptions of infections again, which will require countries to take initiative? Hard to predict, I can't judge. But we look upon sort of the civilian part.
Supply chain is critically important as well around the world. Those are the main things we work with.
Perfect. That's a good question. I'm going to take one more question here that we have, very interesting questions from the web, and then I'll leave the floor back to you, to the moderator. I have one investor here from London wondering about the aeronautical division's performance in the quarter and especially highlighting whether the campaigns that we work on and associated costs with that. So his question is, are there any late stage negotiations going to highlight within Aeronautics?
Well, I mentioned the campaigns. The most obvious ones are, of course, the Finnish campaign and the Canada campaign. And there are activities all the time. We have done a tremendous effort now to hand in a very comprehensive we will hand in a very comprehensive offer to Canada. And that takes a lot of sort of resources and costs to do that.
So the market activity and the market cost is quite high connected to these campaigns. But either you're in or you're out. You can't do it halfway. So when we go into campaign, we do it to win, of course. So we push ahead really hard on these ones.
The operations as such is going exactly according to plan, as I mentioned before.
Very good. Thank you, Mikael. Do we have more questions from the line on the teleconference?
Yes, we do, Mr. Merchant. Can I just pass over the floor to Mr? Sesh Tusa to ask your question? Mr.
Tusa, please.
Thank you. So just one follow on. I wondered whether you could say what you intended to do with the cash that you will receive from the sale of Vrycon shares. Should we just assume that, that will go to reduction of debt? Or is do you have any specific intentions with regard to that cash?
I wouldn't comment in detail on that. I mean, as you know, our strategy is about investing in technologies that will be important for us going forward in our core areas. We'll continue to do that. We are a company that will continuously have a high level. We also have pointed out a few strategic countries that where we would like to increase our footprint.
So that could also be alternatives to either grow organically or as we always do, look at sort of acquisitions to strengthen ourselves in our strategic countries. But I won't pinpoint a specific thing, but it's good to have this cash coming in to strengthen our financial flexibility and to support our strategy.
The next question we have from Ms. Aneska. Ms. Aneska, your question please.
Just a housekeeping question. What is the reason for the relatively low corporate cost in the quarter? And what are your expectations going forward? And also whether you had any support from the governmental aid in the P and L EBIT as well? Okay.
The corporate you're right. In the quarter, we have a fairly low negative result from the corporate segment, and that is from two areas. One is the lower cost level than we yes, the lower cost level, as I mentioned. The other one is also that we, in the closing now, have some group consolidation entries that went, let's say, to the in the right way this time. So it's not a sustainable effect.
You shouldn't extrapolate this quarter from a stewardship point of view. This is too low. So it's this is a little bit better than if you should extrapolate on from the stewardship point of view.
No, we haven't had any P and L effects from any initiatives from government supported initiatives now on the P and L.
Thank
you very much. Since there are no further questions at this time, I would like to hand over back to Mr. Merton for any additional remarks. Thank you.
Thank you. I think we have one more question here I saw from Ronny, Investor. Maybe we can clarify that too. He's asking here, does there need to be a plan to align the cost in EPS division with the future demand that you mentioned before in your presentation?
If there is a plan? Yes. Of course, there is absolutely a plan to mitigate the cost situation in IPS as a whole in all the different businesses going ahead. So that's a very important plan that we've started to execute now, and that will continue during 2020.
Good. I think with that, we've covered all of the questions from the teleconference and also from the website. So we thank you a lot. Do you have any final remarks that you would like to say?
I just like to thank you for listening in and for all the good questions. I can just assure you that Saab will continue to push forward according to our strategy, and we have lots of initiatives going. And I look forward to update you on that after the Q3 report, of of course, how we are performing. And I just wish you a fantastic summer then, and stay safe out there. Thank you.
Thank you.