Hello and a warm welcome to Saab's Q4 Results and Strategy Execution Update event. My name is Merton Kaplan, I'm the Head of Investor Relations here at Saab, and I will also be your moderator. So with that, I want to welcome you again here. We have a full live audience, and we also have viewers online, so we'll be webcasting this and streaming this online for our viewers. So 2023 was a year with a lot of things happening and impacting our industry, and this obviously had implications and impacts on Saab as well. So we're here today to discuss and talk about Saab's growth journey and the next steps that we're taking on that path. That is also what we'll cover in today's agenda, so I'll walk through that with you briefly.
So we will focus on three things, actually, and that's the recap of the Q4 results, and then we'll have a deep dive into the strategy execution updates, and we have saved a Q&A that is a bit longer than usual for you, so we're going to take all the questions afterwards. And for our viewers online, you have a link in the press release from this morning and also in the report that you have to click to, and we have a telco moderator that will assist you. So we will do a Q&A live and with the audience online. We also have a chat for those who want to type in their questions. So without further ado, I want to start the program, and with great pleasure, I want to invite you, Saab CEO Micael Johansson, to the stage.
Thank you. Good morning, everyone, and most welcome to Saab today and also to you all online. Great to see so many people in the room. This is sort of a bit unusual now to have this setup, but I look forward to it. Of course, I will try to give you a view of the Q4 result as a start and then talk about the full- year and what happened during the year, and then look forward a bit and give you a strategy update on what we talked about in the Capital Market Day in February 2023. So it will be a whole package, and we have a little bit more time today, myself and Christian Hedelin, and I look forward to all the questions, of course, that you might have.
We'll discuss the future as well and why we have updated our long-term, mid-term targets, of course, looking at what we see around us and our position in the marketplace. So let's start directly then with looking into what happened during the year. We had a very strong year, and I mean, look at the market position that we have now generating almost SEK 7 billion-SEK 8 billion in order intake. We are strong in all the home markets, as I call them, or focus markets, strong in Sweden and all the other countries where we have established ourselves as a company. And this is an order intake that is not built upon what we call the mega deals. So it's lots of midsize orders and small orders as well. And of course, we are chasing the big orders as well, but we don't build our whole future on them.
So this is really strong. For the first time, we have passed the SEK 50 billion mark in terms of turnover, SEK 51.6 billion, and we grew almost 23% organically last year. This is sort of in the higher end then of the guidance that we gave for 2023. EBIT grow more than the turnover, which we have always said it will, and it was 30%. We take the right steps all the time, so we improved our margin with 0.5%. This is, of course, in a very strong growth scenario, which we have to think about. We need to be able to invest and spend money on capturing marketing opportunities, of course, and we employed lots of people, but we still have to have the right trend on profitability.
We had a very strong Q4 on cash flow, so we ended up with SEK 3.2 billion in cash flow, which is SEK 0.6 billion higher than last year. That is also a good sort of cash flow level looking at that we actually spent SEK 1.3 billion more in investment in 2023 than we did in 2022. A few highlights from the fourth quarter, also a strong quarter building the full strong year, 16% growth, SEK 31.5 billion order intake, and also a good profitability level. The profitability level was affected by a minority write-down, and if you had added that back, SEK 66 million, we would have been at 9.2% roughly. Then again, you have to remember we spend lots of money in marketing now trying to catch market opportunities.
But also we have evened out the quarters over a year quite a lot, so I still think this is a very strong quarter adding up to a very strong year. So we see a very strong demand in the market. We have a few things that happened during the quarter that I think is really important to us. We have now gotten approval to set up a company in India and owning 100% ourselves on that company, first defense company that got that approval, and this will be an important factory for ammunition to Carl-Gustaf and Carl-Gustaf manufacturing. We have done a number of things when it comes to NATO, collaborating with them, but also seeing some good things happening when it comes to getting the first contracts from the so-called procurement organization within NATO, the NSPA.
So things are coming now in terms of RBS-70 missiles and AT4 and Carl-Gustaf. And then we have done a change in our organization, so since we have a naval business around Saab Kockums, we have now moved the underwater business from Dynamics, which is more focused on the army side of things, doing the support weapons, but also training and simulation. So we think the underwater business will have greater synergies with what Saab Kockums is doing today. And we have continued on recruitments, of course. We have a fantastic staff in the company supporting this growth, and we've added 2,500 people net last year to our company, and the last quarter last year was 700+. So it's an incredibly strong growth in the company in many aspects as we see it. When it comes to orders, during the quarter, we had a few important things happening.
As I said, the NATO part of this, but we also got the second batch on the T-7A. So now we start sort of the we are still in a low-rate initial production phase when it comes to T-7A in the U.S. This is in West Lafayette, Indiana. But it's a continuous production. It will become more and more profitable, of course, when we get more volume into the factory. So this is a very important contract to us now to continue the T-7A production. We got some parts connected also to the success of Saab not Saab, the Hägglunds, BAE Hägglunds success in the Czech Republic. So we have content in these vehicles. So that was a contract roughly SEK 1 billion. We got new contracts on the naval side and radar side in the U.S., so that business is developing really well.
We got the big support contract from South Korea on weapon locating radars, ARTHUR. You can pick many examples of important contracts, but you won't see a huge, big one in sort of what we're seeing now. It's many midsize contracts looking and that looks good, I think, and that still builds up to this big volume of almost SEK 7 billion-SEK 8 billion over the year. A few highlights from our four BAs then. Aeronautics is sort of an organization that has two big contracts when it comes to the Gripen for Sweden and Brazil. Brazil got another aircraft delivered, so they have now seven in operation. We are sort of delivering a handful to Sweden as well as we speak, but we're still in the early phases of delivering these from a production perspective.
We have already started to think about how do we create the future combat air system together with the Swedish customer, the Swedish Defense Forces. That might seem early. The Gripen E will have its lifetime up until 2060, but we will have to add capabilities maybe in the systems of systems. Beyond that, we need to figure out what we do when it comes to the air domain. This is an important study which will lead to some sort of decision, how do we handle this going forward, maybe in a couple of years' time. We have got an important contract from a very important area when it comes to the total defense, and that is to be able to do firefighting both in EU but mainly in Sweden.
We handle that as a service, and we got a new contract for a few years now from our agency in Sweden. We have also aligned sort of how we view the value of our contracts in the organization. This is more of a technical thing, but of course, every contract needs to have the same value in terms of how it looks like in the index clauses we have in the contract. So that affected this with SEK 4.3 billion in Aeronautics. The T7 is really important to Aeronautics, and long-term, this will be a very important program. We have to remember that we have 350 aircraft to deliver. We have just now started to deliver the first five to the U.S. Air Force for testing. And we've started, as I said, to manufacture the low-rate initial production of aircraft, but there will be much to come.
Today, we do have an underabsorption that is affecting Aeronautics profitability. And of course, that is why it will take some time before they come back into reasonable profitability levels, I would say. So this is why Aeronautics is a bit lower than the other business areas. Dynamics, extremely strong growth. Look at it. I mean, I think they had on order intake a couple of years now, improving the order intake 60% a couple of years in a row. And the demand is extremely high. The book-to-bill is great. We have also, on top of that, done a fantastic thing together with Boeing in launching a new product called Ground-Launched Small Diameter Bomb. And we did this in nine months together with Boeing. We took existing SDB missiles from the inventory of the U.S. Air Force.
We did a new setup on the missiles so it could be ground-launched in a six-pack, so to say. We built the launcher system, a fire control system, put that together in nine months, and we have now started the deliveries. We're going to deliver more than 600 of these now, and there will be more to come. So this is an incredibly important start of a fantastic system, of course. We will do the main part of this in the U.S. because of supply chain issues and so forth. We're really happy to have something that can actually target something on ranges like 160 km with extremely high accuracy, ground to ground. Strong sales in Dynamics, growing dramatically, as you know. The margins are still high but a bit normalized because of the mix that we had last year.
But they will be continuously high going forward. And we are building capacity as we speak. We invest heavily in capacity in Sweden, both in Karlskoga and Linköping, but also, as I said, starting our production facility, building that in India. And we will set up shop in the U.S. as well because we need redundancy going forward in this area. Surveillance, also a growth area. They have picked up incredibly well in terms of profitability but also growth. And the interest in our radar portfolio is very high. We have contracted more than +50 radars on the Giraffe 1X last year. So that is a very successful part of the portfolio. And we have launched a new product, which is a very compact EW equipment that you can either have on a drone or on a mast or something.
And we have great potential also, of course, when it comes to the bigger systems like GlobalEye. So the sensor business and command and control in all domains is really looking favorable going forward. And the U.S. portion of this is developing really well. We found our niches in the U.S., and I think we have more to do in the U.S. on the sensor side. And it's quite, branding-wise, nice to be on one of the aircraft carriers with our radar technology in the U.S., which happened this quarter. And as I've said earlier, we have a journey on the profitability with surveillance, but now we're getting back to the reasonable levels. Saab Kockums is also doing really well. And why they are doing that is, of course, a mix.
International contracts, mainly on the surface side, and the support of surface vessels is mixing with the submarine activities, generating a good mix and a good margin and a good growth. We had done the second keel laying activity for the SIGINT ship we're going to deliver to Poland, and that program is going well. We are now entering into an incredibly exciting phase of will we or will we not be selected in the Netherlands when it comes to the submarines? Hopefully, that will be some sort of decision during the first half of this year. We have capacity limitations, which we are mitigating by actually doing activities also in Landskrona, not only in Karlskrona, on certain parts of the systems to boost capacity. That's why we are establishing ourselves in Landskrona.
We have this fantastic mix now, so Saab Kockums is now a very healthy business area going forward, and both a good mix of international contracts and Swedish contracts. Combitech is also developing really well, and I would say the total defense activities within Sweden that get back to a more constructive way of managing infrastructure, transport, energy, prepare for security matters in different sites and so forth is something that Combitech is really good at. And also, the relationship with the Defense Forces and FMV is important. And then they have, of course, some consultants working with Saab. So this is an important resource sort of flow and competence flow between the two organizations.
They are a fully owned Saab company, of course, but it's important that they have a mix of working with new technologies in other business segments then and bringing capabilities and competence back into Saab. They are developing in the right direction as well. They do that, of course, based on that they employ people and get more hours into the organization, even though they try to do more of sort of firm contracts rather than to sell hours. But they are developing extremely well also, I think. Looking at this year, we have now settled on a guidance of organic sales growth between 12%-16%. We will grow our margin more than that, and we will continue to generate the positive cash flow, even though we will continue to invest.
As I said, we invested SEK 1.3 billion more than 2022, and we will continue to invest quite heavily the next two years as well, at least, to build capacity. But we have the strength to do that and still generate reasonable, positive cash flow. So I look upon the future in a very positive way, and I will come back, of course, later today to talk about this in a broader perspective and how our strategy looks like. So with that, I think that was my last slide, and I will hand over to my CFO, Christian Luiga. And I won't do this for you, so you have to do it yourself.
Okay, as always. As always. Thank you very much, Micael, and good morning, everyone. Welcome to Saab here in Stockholm and welcome on the web and on the phone.
I'm going to walk through now the financials, and then we'll come back in the second section a little bit more on the outlook and strategy execution. So I'll try to keep it brief in this first section. But before I start, we have a very good momentum right now. Many people are working very hard in this company to both improve our market position and deliver on all the bids, but also to build capacity and make sure we actually deliver according to the numbers now we have showed. And I'm very satisfied with the margin improvement that we are doing. We have said steady margin improvement over time. EBIT should grow faster than sales, and we are delivering on that in a very comfortable way.
We have a very strong financial position, and we also balance our earnings and net working capital and investments in a good way to still deliver a positive cash flow. But start looking a little bit at our order position, and one would say Saab Group now has three times sales in its order backlog. Actually, it's pretty much the same as last year. So most of these numbers look very much the same. So Dynamics at 3.7, I think it was 3.6 a year ago, but they have been growing close to 40%. So that's impressive in itself, growing 40% and keeping this backlog increase. I think that's the message with these numbers, not the numbers in themselves. The other thing that we have already seen getting into this year is that Surveillance and Dynamics part of the order book is increasing.
So the balance in the group now is that Aeronautics, Dynamics, and Surveillance pretty much have the same order backlog around SEK 46 billion and one-third each. And then 10% on Kockums and a bit on Combitech. That gives a better picture also and stability. If you just go back two years in time, Dynamics was like 24% of the backlog. Now they are 31%. Looking at the next year number, which is important here, we're growing our order with the 20% backlog, the order backlog with 20%. Next year is 19%. We look at that as a good foundation then for the outlook of 12%-16% growth. Looking at these numbers and looking back at history and what you need to achieve in order to sales, this actually comes in quite good compared to our outlook for the year. A bit details on this.
We'll come back more, and we talked about more on the profitability and sales on the different business areas. But the quarter had a strong sales growth of 16%. We had a very strong sales growth last year as well of 16%, the same number. Organic and reported sales is pretty much the same number. The EBIT did have an impact of items affecting comparability of SEK 66 million, as Micael said. Without that, EBIT would have been growing 13% in this quarter. And that is on back of a very strong Dynamics and Aeronautics profitability improvement in quarter four last year. So the comps were a bit tough. Something else very interesting on this picture is, of course, the financial net positive that improved. And I'll come back to that on the next page.
In the quarter itself, if you look at the corporate cost, they were quite flattish if you take away our minority portfolio. So looking at the minority portfolio losses last year and this year and take that out, we had a quite flat year-on-year cost in the corporate cost. If we step into the full- year a bit and look at those numbers, I'm going to go down directly on the financial net. It went from more or less -SEK 450 million to +SEK 150 million, a big shift. One item of that is the balance sheet that we have in combination with the interest rates that have moved, have made our net interest from -SEK 70 million to +SEK 110 million. Another thing that we talked about already two years ago was that we have quite a big bond portfolio because we have so high liquidity.
With the revaluation, we had a loss of SEK 300 million that now is a small positive. It's around SEK 350 million just on the revaluation effects comparing year-over-year. Those two impact most of this change. You can say we're moving into and this year's impact from revaluation or 2023 was not that big. We're moving into a more normalized net financial position here and net financial net. We also have a tax that was impacted last year, and we have said we should be between 21%-23% in tax cost. We are delivering 22%, so we are in the middle of that range. We also said that the paid tax should be around 90%-110% of the tax cost. We are within that range. We are this year having a normalized position on that tax position.
Then sales development. As expected, sales grew, and we had all expected because we had guided that way that throughout the third quarter would be stronger than the last quarter, and that's how it became. We came in the upper part of our range of 23% for the full- year. The fourth quarter had stronger comps, as I said, last year, and we have a more even sales pattern this year. And this is when we move up in capacity. It's harder to have sort of fluctuations. We are going more and more on full capacity in each quarter. Something that is very notable, we'll come back to that in Micael's later presentation, is that you look at the strategic countries of the U.S., U.K., Germany, and Australia. In those combined, we grew 50% in 2023.
In the last quarter, in the last quarter, we grew 50% and 46% in the last quarter. So it's pretty much the same number, which is a strength and something that is part of our strategy. If we look at sales per business area, we already talked about it, that Aeronautics was weaker, but they had a strong last year. They had 17% growth in quarter four last year, even though they only had 6% on the full- year. This year, we have 6% on the full- year, but then from a comp perspective, we had -2%. That means that the total production and POC buildup is not that high. I mean, 6% growth on this. And T7 is not growing that much on sales yet. Very few, as Micael said, that we're working with.
The civilian business is quite also flattish from a sales point of view. When you look at the total numbers, then Gripen is growing a bit small in this. As we can increase that volume over time, we will also have a higher POC to bring into the sales. When T7 comes in and also if we get more support and services, innovation services, that will be triggers to drive growth. Something else here is Dynamics, which is growing nicely with 34%. I think that is something that is interesting when we get to the next picture and look at their profitability. Surveillance is also growing. This is two areas where we are now investing hard to meet this increased order backlog and order intake to deliver to our customers in a very important period.
But also Kockums was growing, and they were growing on surface ships and on submarines. They have a lot to do down there, and we have just announced that we are opening up an extra facility in Sweden to actually support production. The growth here is both on material coming through that we help the customer to put on the ships or repair with, but also then on labor and work. So it's not only that we can grow this massively with labor in Kockums. Combitech is a good year, 15%, 8% in the fourth quarter. It's a lot about bringing up employees, utilization, and also the price. We see that the civilian side is becoming a bit weaker, but the total defense side is becoming stronger.
We have a very good foothold in the defense side, so that makes us very comforted that we will continue to be able to gain market share. If we look at then the margin here and the EBIT, one of the big things here is Dynamics. Dynamics is actually going down in its EBIT year-on-year, even though the sales growth is 34%. And that is the margin decline that we have talked about since last quarter four and throughout the year, that this is a year where we will sort of go back to more normalization. What I would say is then that we have probably met sort of the bottom of that margin decline. And from here, as we build up capacity and we can get more scale, we should be able to slowly improve this, if anything, rather than the opposite.
So it's been a tough year from that point of view, from a financial point of view and EBIT, but it was all expected. We tried to be very clear on that last year with this normalization discussion. It actually delivers in line with what we expected. On this picture as well, we can see that Surveillance is improving. That is something we also said last year at the Capital Markets Day. I think I was very clear and said if there's any unit I know will increase its margin and improve its EBIT this year in 2023, it's Surveillance. I don't know how much, and I won't tell how much I said, but it's very nice to see that they have improved from 8% to 11%.
That the sales growth is also coming with a good margin improvement, and the scale effects are coming through. In surveillance, they have also done hard work, and we talked about for a couple of years of improving efficiency and profitability in certain units. We talked about foreign units like South Africa being loss-making before. Now they start to show black numbers. So we have worked through and done a good job in improving profitability in that unit. Cash flow. So first question probably from you is, is this as expected? Well, we did expect this kind of investment uplift. We said that we will have to bring up investments to meet the capacity that we already saw in 2022.
In 2022, actually, we said we're going to take a bet and start to invest in Dynamics because we felt that it's quite sure that we will have a demand coming. We talked about building up inventory, and we talked about starting to invest. And we have continued then to build up inventory this year around the same numbers last year. So even if we have a much higher sales growth, we don't have a higher increase in inventory. And that means, which I said last year, we are sort of full in the barns with everything we can get in.
And everything we can get in that we will be able to use [in] the next 12-18 months, we will try to bring in because we want to make sure that we can deliver because it will generate sales, and it will generate profitability and scale, and the cost of capital is less than actually that gain. We continue to try to do that, but this is as much as we can bring in actually from an inventory point of view because the barns are quite full in Surveillance and Dynamics on the stuff that we know we're going to deliver for the next 12-18 months. And investments, we have then ramped it up, and I will come back to that in my second session. This number is very close to what we expected for this year.
It's hard to start to invest faster because investments take time to plan. Make sure you do the right negotiations. Make sure you have actually control of how you work in the group together and make sure that we don't build something we already have or we utilize the synergies between the different business areas. And for that reason, we have actually implemented a sort of better investment control. We know this is going to be a big area and hired investment controllers and made sure that we have detailed plans of everything and can follow up both on the purpose, the timing, the cost, the procurement for these investments. Very important part of now how we steer this company going forward. We do have a solid balance sheet. It is very similar to last year's picture. We had around SEK 2.3 billion in net liquidity last year as well.
So it feels like reporting the same thing. With the financial stability and the position and also the growth in earnings that we have, the board has proposed to go to the AGM with an increase in dividend of 21% to SEK 640 compared then to SEK 530 last year.
Good. Then it's time for me to hand over to the next session.
Yes. Actually, before we do that, thank you both, Micael and Christian, for the wrap-up of the results. So we're going to deep dive into our second part, which is the strategy update session. So bear with us. And also for those viewers online, we do have before that a video clip that we would like to show you, and then I'll have you on board here again, Micael.
2023 was another year of extensive growth for Saab, as the world was once again reminded that peace and security must be protected. Without industry, there is no defense, no deterrence, and no security. So therefore, I'm actually extremely grateful for what you do as the defense industry every day. Thank you so much. As the entire defense and security supply chain is put under extreme pressure, Saab has significantly increased the production of its weapon systems, but more needs to be done to meet the demand. Saab has secured important partnerships, for example, with Babcock to develop new systems and platforms. It's aimed at complementary designing things together and launching products in the export market when it comes to surface vessels. Digital development was accelerated by the acquisition of companies such as BlueBear in the UK, CrowdAI in the US, and investing in Helsing, a European leader in AI.
Well, for 23 years, BlueBear has delivered world-class solutions in the field of AI-enabled autonomy. Today is a very important day as we take the next step in our journey. Many new employees have joined the company, bringing new capabilities and ideas with them. Saab and its network of partners have managed some major achievements during 2023: the unveiling of the first airborne early warning system to Poland, a massive increase in ground support weapons to many customers. Gripen E and T-7A flight tests have begun alongside the first deliveries of the airplanes to the customers. In Brazil, a new Gripen E production line has been inaugurated. A SIGINT ship has been delivered to Sweden, and a new radar production facility for Giraffe 1X in the U.K. has opened, which are just a few examples.
We continued to see how effective many of our systems are on the battlefield in Ukraine, protecting lives and defending democracy. During 2023, the sky and even beyond was also on the agenda with the launch of a new VDES satellite, and one of Saab's test pilots will soon join it in the orbit on a mission to space. If you want to have a strong communication capability or awareness of what's going on on the globe, you have to be in space. That is the way we're doing it right now, and I can't see that that would not continue to develop. With solutions in all domains, Saab is uniquely positioned to continue to grow both in Sweden and outside its home market. Saab is geared to face coming opportunities, building on its commitment to keep people and society safe.
As you saw, we talked about this film said that our test pilot, Markus Wandt, is about to go to space, but he's on his way back, as you know. There will be, I think, a splashdown in a few hours only. Look forward to that. And I had the privilege of seeing the launch event and talking to him in Florida before he left. So it's an exciting day in many respects, I would say. But let's talk a little bit about sort of where we are and how we see the context around us and how things are developing and how that affects us as a company. That's sort of what this portion is about. And one has to sort of take a look at things that we thought would happen when we looked at this a year ago.
Unfortunately, many of the predictions or things going in the wrong direction have been materializing. There is a big tension in the world in many respects. Many things have happened in terms of that countries have sort of realized that now we have to spend more money on defense. There is actually an aggressive Russia that won't give up. There is no negotiation. There are many incentives being set up to do collaborations, have countries come together to sort of specify the same requirements, and then us as industries working together to quickly increase capacity. It's been clear that we are incredibly dependent on the U.S. to have sustainable support to Ukraine. And Europe has to get her act together. We have great industries in Europe. We can do much more, but the balance is wrong. And we talked about that, and it's been so clear now.
It's quite scary to see now when the U.S. is sort of wobbling a bit in the support of Ukraine and how important it will be for Europe to step up quickly. It will take some time before we increase capacity. So realities are not better, I would say, from a geopolitical tension perspective, as far as I see it. Look at how our politicians are talking about the tensions and the situation we have. I've never been part of a seminar in Sälen before where politicians have clearly stated that it can actually come to war in Sweden. We have to be prepared. We have to create resilience, and we have to be better at the total defense. So it's times of lots of intensity to sort of get into a situation where we have deterrence, where we can protect our societies and people.
There's no end to how we see the war in Ukraine is going to turn out. The support to Ukraine, in many ways, is so incredibly important, not only donating from different countries, but also making sure that we, as an industry, finally can start delivering directly to Ukraine to support them to win this war. That is not so easy. We are doing that as far as we can, and it will be more and more. There are several steps in this: supporting countries that's donating, delivering directly, being able to support them on repair and overhaul close to the border and eventually inside Ukraine, and eventually also collaborating with the Ukrainian industry because they have to build their own capacity when things are different going forward to have resilience in their society. There are many, many steps, and this is a long-term thing.
We're also seeing, of course, a complete shift in what is the rule-based order now. This is not only the Western sort of view of the rule-based order. We're going into a multipolar world, and how will that affect us as industries? Who are our like-minded countries? Who can we work long-term with without risking sort of things and have a risk profile of the company that is reasonable and have resilient supply chains and all that? It's not only the U.S., China. Where is India going? Where is the Middle East going? How is Latin America thinking about things? And also a strong movement when it comes to Europe in terms of we have to get together to do more things together. We are not the United States of Europe.
We are different countries with a national sovereign perspective of things, but we have to come together to actually get our resilience up to another level. The EU is trying a lot of incentives to do that, which I support fully. But we have to do more. And it's all about sort of it starts with the same requirements from different countries so we, as industries, can collaborate and move forward and increase capacity. I must say that the state visit that we had from France last week was a big sign of how much we talked about Europe rather than just Sweden and France bilaterally, but how important Europe was. And France is acting in that direction also now. So many things are sort of moving in it's a scary situation, but we're taking many mitigating actions.
But I mean, in our part of the world, we have to sort of step up. That's my take. And it is also incredible to see if you look upon the market, especially in Europe then, and how that has changed only from sort of the end of 2021 where there was a sort of a plan. And this is, of course, independent assessments and not us sort of talking to every country, but the source here is Janes. And then in the beginning of last year, that has dramatically changed. And now again, when we aggregate the demand in terms of what spending will look like over the next 10 years, it's another $500 billion up US.
So, of course, that is one of the reasons looking at our position in this marketplace, why we have now taken a step midterm to increase our view of how we can grow as a company. It's also, of course, as our Secretary-General NATO said, which is very sort of good to hear, that there is a connection between capacity and capability with professional defense industries and how good the defense forces will be in building their capacity and create resilience. And without good industries and professional industries, there will be no defense. So this puts the whole debate about ESG, whether we are a sustainable type of business segment, completely off the map. I mean, this is the foundation of sustainability that we can create this resilience.
What we do as industries now in discussion with different governments and how to build capacity to handle potential large conflicts, wars like we see in Ukraine or other types of war, is so incredibly essential. Now, I will say that what worries me the most is that we don't do enough. We are taking fantastic steps, and I'm so proud of our employees supporting the growth of this company. 23% is great. We are investing heavily, proactively ourselves to support this. We might have to do even more in the context of what's happening around us because we come from a peace perspective of things. We have sort of a lot to do to get back to a level where we really, as European countries, can feel confident that there will be no aggressive actions from Russia. That takes long-term commitments from governments.
I am prepared to take risk, but it has to be in some sort of a handshake with governments if we're going to do more in terms of new sites, high capacity because there is no way around this. Either we build stockpiles, which is substantial, in combination with production capacity that is substantial, and we will have to agree that we will never let us sort of pass a critical mass downwards if things look better in the future. We can't afford to dismantle things once more. That's what the long-term commitment is all about. So there are still discussions that we have to have in terms of taking steps here. But it's not only capacity. It's also technology, as you know.
I mean, what we see in Ukraine is this mix of doing conventional stuff, mixing that with new tech, and quickly getting that into the theater and adapting all the time. This is a new way of handling things, and we need to get our act together on that as well. I'm not saying we're not absorbing new technology. We are in many of our systems today, and I'll get back to that. But we can't just focus on capacity and ammunition and missiles and sensors and aircrafts. We have to look upon how can we change how we actually accomplish capabilities going forward by absorbing AI, autonomy, connectivity, do things in a different way. So we have to do both. There are incentives in place. Both NATO and EU are creating incentives to make us work together and increase capacity. Is the money enough so far? No.
There has to be more. Absolutely. The ASAP is a good thing within the EU to sort of come together, and the calls will be decided now in the March timeframe to sort of support us, build missiles or support weapons and 155-millimeter ammunition. But look at the facts. Russia is doing probably 5 million artillery grenades a year now. Europe is at the level of 350,000, 400,000. Ukraine is using 2.4 million a year. So we have a way to go. We need to do a lot more. So this is, of course, a step up in our growth journey. We have a great backlog today. We're growing, and we're going sort of in another direction. And this is why we're taking the step now to say we'll grow averagely on 15% in the next coming years. And we have to continue to invest to build this company.
We have to add people to do this, of course. I'm so proud of the existing employees, and we're adding 2,500 net last year. We probably will add a lot of people also this year, a couple of thousand probably. But we will have to do things in a different way to grow even more. And that is, of course, about our automation, using new ways of working, developing software, using co-pilots to a larger extent. We do that. But I mean, there are so many things to do when you grow as a company, not only investing in infrastructure, but the ways you work with things changes dramatically when you have volumes. And this is something which is part of our growth journey. And we will grow, but we will have to do that with the increased trend of profitability, as we've said.
The EBIT has to grow more than our sales all the time while we are growing. But it's a step change and an extremely inspiring environment to work with all our employees. Strategy-wise, I want to make a few comments on these blocks. You can't summarize a strategy in sort of one slide, but this is a try. Of course, it's about market and where we go in the market and how we capture market, how we capture the market and position ourselves better in the market and how we actually gain market position. What do we do with our core areas? I think we are exactly right when it comes to what we do. People are asking us, "Why don't you have to sort of limit yourselves in what you're doing going forward now?", looking at this growth.
But I think being in the air domain with fighters, the GlobalEye, and doing submarines and surface vessels, sensors, and advanced weapon systems and command and control is absolutely right. But they will develop using new technology. Will we not sort of think about things we shouldn't maybe do or whether we should collaborate with someone and so forth? Of course, we will. But those are details. The main portions of Saab are right. And I think those are exactly the right core areas that we need to keep up developing. Operational efficiency is truly important to us. I touched upon that. And then, of course, the whole thing about sort of who will we attract as employees. We had more than 100,000 applicants last year who wanted to start to work with the company. We sort of raised our 2,500 net to 21,600 roughly now. And that will continue.
But the interest to work with Saab and in Saab is huge now. The sort of perception of what we do and the importance of what we do, the purpose of what we do has been understood to a much larger extent. There are still people asking me about, "Do you do cars anymore?" and so forth. But that doesn't happen that often anymore, I must say. So looking at the market and our strategic markets and how we're growing in this market, Sweden is, of course, spending more, and we're growing with that, I would say. We have a big portion of what Sweden is spending in defense today. And it always depends on what kind of systems you will add to the capabilities. But, of course, Sweden is our home market, very, very important to us.
So when the market is growing, the bars here show sort of how the market is growing in itself. And the vertical bar shows how the market is growing. And the yellow bar is showing how we comply with that. Are we growing faster in the market than the market itself, taking market positions, or are we sort of behind? Sweden, we're proportionally growing with how the market is looking. And that is a big portion. We're roughly between 30%-40% on a yearly basis in terms of revenue in Sweden. And then if FMV spent SEK 80 billion last year in contracts, we get a big portion of that. But that varies over the year. So you have to look at sort of the yearly revenue to have a view of this.
But you can say that roughly, Sweden is 30% of our share, a third of our share. The operational countries or the focus markets, which is Germany, UK, US, and Australia, represent a third, and the rest of the world represent a third. That's how we look like today. And Germany is picking up dramatically. We're taking market shares in Germany. We will be successful now in the Eurofighter with a very sophisticated EW system together with Airbus Defence . We have grown our Nürnberg facility in EW and Sigint. We are training the army in Germany and running the whole training site for them. We are successful in the naval domain, supplying combat management systems and sensors. So many positive things are happening in Germany. And Germany and Sweden are quite close also. So that is an important collaboration countrywise. UK, the same. We've invested in BlueBear.
We're setting up a new facility in Fareham in the U.K. to build sensors, many new contracts on the sensor side. U.S. also. U.S., I will come back to a bit, but you can talk about the U.S. It's a huge market. I mean, it's $800 -900 billion a year. Not all of that is acquisition, of course. And there are many, many big players. So strategy-wise, we have to think about, do we compete with them, Northrop Grumman, Lockheed, the Raytheons, the yeah, what have you, Boeing? Or do we find partnerships with them or sort of take sort of niche contracts in the U.S.? We've reached a level in the U.S. now with more than 1,000 employees, 1,200 of no, 1,000 employees roughly, where we are looked upon as a competitive player from the other players.
So we have to be standing on our own feet more and more going forward, I would say, to increase our capacity or increase our volumes in the U.S. And we're doing that in a fantastic way. I talked about the sensor side of things. We deliver sensors to aircraft carriers. We have the Ground/Air Task-Oriented Radar , a huge program. We are on the T-7 together with Boeing. We're going to be able to support every pilot being trained in the U.S. It's a Swedish company. Think about that. And we have now launched a Ground-Launched Small Diameter Bomb . It's easy to say it like that and the acronym, GLSDB, together with Boeing. And that will also be big volumes going forward. So we're doing really well.
But strategically, I think we have to think about who we want to be in the U.S. going forward, a little bit of a major player rather than just a small partner. That is sort of the direction I'm seeing. Australia, we have been selected as the supplier that will deliver all the command and control systems to the naval vessels in Australia, surface vessels. And we are taking market shares, and we are diversifying into other areas as well, really going well. So we have selected the right sort of focus markets, I would say. And then, of course, we won't let go of the Asian market or Latin America or anything like that. And Sweden will always be super important to us. But this is also why we spend quite a lot of money now in marketing and offering new things to the customers.
It's a huge intensity in the marketplace. A couple of examples on how we boost capacity now. We're building a new facility in Linköping to do the tubes for support weapons. I mean, you know. I mean, all the backlog has doubled in this last year in Ground Combat . Now, this is Ground Combat of Dynamics. This is not the full Dynamics. We're investing between SEK 1.5 billion and SEK 2 billion now going forward to boost capacity even further. We have been selected to run a company 100% owned in India to build Carl-Gustaf and other things there. We will have to establish ourselves in the US here. We are a program of record when it comes to Carl-Gustaf in 1984.
But the U.S. is going sort of from a security perspective and making America and ITAR regulations or what have you, we have to be even more localized in the U.S. going forward. It will be more difficult to sell into the U.S. sort of directly from Sweden or elsewhere going forward. So that we are working as a strategy now to also set up shop in the U.S. So this is do as much as we can as quickly as possible, both to increase capacity but also to shorten lead times. Because this is the question about, are we doing enough? If you talk to our customers, if you want sort of even more to get to a position where lead times will be 18 months instead of four years, we have to take bigger steps.
Of course, we are doing this to a large extent. This is what it's all about. We can add things to the backlog, but the lead times will increase unless we take big steps in capacity. So that's really what's happening here. On the sensor side, it's the same, very successful story. I think I said that we had 50+ bookings of Giraffe 1X radars during the last year. And we are investing also to boost capacity in Gothenburg to manufacture things. But we also set up shop in Fareham, UK, together with our underwater business. It has really nothing to do with each other. It's sort of the autonomous and remotely operated vehicles from Seaeye. But they have facilities. We are using and building a new facility to do also radars here. That's a sort of efficient way of doing it.
We, of course, employ a lot of U.K. people, and we become sort of more of a home market to us. We do the same thing in Finland, the new product, Saab's compact electronic warfare system, small thing that can be put on a drone or on land also, of course, different domains, have now been successful. So we have to boost capacity building these things in Finland, which is good for us redundancy-wise also. So lots of things are happening in the sensor side as well. One has to remember, adding 2,500 people also needs capacity growth in terms of where people have their offices and where we can work together and all that. There are limitations to existing facilities. So infrastructure investment is going up, of course, to support this. But it's all about capturing market.
Now, I talked about how important it is not only to look at here and now but to have a view also on technology. We are boosting our investments in new technology. We've said that we will add another SEK 1 billion to this in the next coming years. And I think we will reach that level much earlier than 2027 as we look upon it right now. And the things we're looking at, we call it swim lanes, but it's about autonomy both in the naval domain and the air domain. It's about handling connectivity because everything will be connected going forward. Everything will be proliferated with sensors. It will be a huge amount of information that will have to be digested using AI technology. And it has to be cybersafe. And we will have to have a connection to space.
And then again, we will continue with our advanced weapon systems. One version of that is, of course, the Ground-Launched Small Diameter Bomb s. What we're doing right now as examples is a huge market in what we call seabed awareness and seabed monitoring and seabed operations. After what we saw happening in the Baltic Sea and realizing how much communication and energy and other flows that will be subsurface, we will have to find ways of adding capability. And we have that. We have the Seaeye capabilities. We have contracts already for monitoring energy transmissions subsea. We got a SEK 700 million contract last year doing that with autonomous vehicles. And there will be more in this going forward. And it's still not so much exploited market doing things subsea with smaller type of unmanned vehicles. Same thing in the air domain.
We will have to look into how to complement manned vehicles in the air with unmanned vehicles, manned-unmanned teaming, loyal wingmen, adding small drones communicated with other equipment is something we are testing and doing right now. And then, of course, how do you counter all these small drones flying around being used, for example, in Ukraine? We must come up, and we have ideas now. We've tested things where you have cheap ways of actually taking out drones. Because today, people are using missiles that are much more expensive than many of these drones because the infrastructure they're trying to destroy is so expensive. But there are 100 companies working smart ways of doing counter-UAS as we speak. And we as well. AI is something that will have to be used, of course, also not only with the products.
But today, AI is within what we do within GlobalEye. It is what we do on the EW side. We call it Cognitive EW, cognitive radars that adapt to the situation around you. There's no way with normal technologies to handle all that information and getting quickly a view of what you have to do and what the situation looks like. It's a big difference of using AI and have a 10-time quicker picture on what you need to do than not using it. That's a big advantage for the end user. So that's what we do on the product side. Operational efficiency is also about new technologies to a large extent. You don't build software today the same way we did a number of years ago. You have your co-pilot. You use anonymous open-source code. You do it in a completely different way.
You use AI to—and this is not news to you, of course—to simplify many administrative tasks, of course, when it comes to understanding situations and context and data much quicker, much quicker. Knowledge-based AI in the organization just to find out, did anyone do an algorithm to solve a situation or a complex problem in a company with 21,500 employees with many sites? Just to be able to ask a question like that and have all the data in the data lake to support that will expedite what we do in a fantastic way. HR is an area. Legal is another area. Procurement, of course. We're all in that now. The systems that we use in our internal network have to be more efficient and supporting cloud technology without risking sort of the security of what we do in terms of data.
So we're doing a lot of these things as well. Then, of course, continuous learning. We have a full-fledged continuous learning capability now with links to very high-level MIT and so forth. We do complete packages now to have our engineers to become more expert in software developing using co-pilots. So whether it's AI or whether it's systems engineering, you can do that in a digital way whenever you have time because we have that online in the company today. I also have to learn a lot. It's also about us in management. You can call it AI for dummies or something. We have also to understand all these new technologies. That makes it so efficient to have this in a digital way. Last but not least, I've talked about this. We're adding a lot of new employees to our fantastic workforce today.
That is also a challenge. To quickly get the productivity, having new employees in the organization is something we need to work on. Onboarding is so important. We have a fantastic HR organization now doing all these things in a much more automated way. But also leadership is required, of course, that handle all these new employees. We have seen a reduced people turnover in the company. And it used to be in different sectors like 14%. That has been reduced dramatically, which I really like to see. And we have a huge pressure on people wanting to start to work at Saab in many areas. And we're not just talking software developers and AI people and data managers and all that. We're talking skilled welders, skilled production technicians, and production people in assembling Gripen aircraft in Linköping. There are many categories where we need people.
So we're not only talking software or something. There are more categories that we need. And we will continue to employ also this year. Finally, from my side, before I let Christian summarize this in numbers, sustainability is very important. We want to be a leading company in this area in our segment. So we're taking this seriously. We have our science-based targets. We have been approved by Science Based Targets initiative . We are now taking another step with a new strategy to make sure that we are really strict on where we want to go mid and long term. And of course, the foundation is protecting our societies and people, a sustainable society, a safe society. As examples, I mean, we have clear targets and a zero tolerance on corruption. And we shall be a world leader when it comes to our compliance program always going forward.
That is absolutely the foundation to what we do. When it comes to environment, we have set up targets now and initiatives to reach zero emission by 2050. A step on the way is 2030 by reducing our by 42%. Then that will continue, of course, and lots of initiatives in the organization. We have reduced more than 20% now since 2020. We are on the right path. Another example is diversity where it's super important to us to have a diversified workforce. I am a strong believer of that. It sounds like sort of a low ambition, but to me, to get just to have a female population in the company that goes from 24% today to 35% as quickly as possible will generate a much more efficient company.
We are high enough today, 29%, on female leaders in the company. But the base is so important. And that's why we support STEM and all the initiatives in all our relationship we have with universities also. So believe me, we have specific goals and targets mid and long term in many of the material areas now that you see on this slide, even though it's really busy. But this is super important to me. So that was a bit of how I see the context and where we're going. And it's not the full-fledged strategy, but at least a snapshot in each and every area. And now I guess you want to talk numbers again.
Well, a little bit about different things, but numbers.
It can't be one hour during a day when we don't talk numbers anymore.
Numbers are the result of everything good and bad we do. So I'll try to summarize how it looks for us right now and going forward. I want to start with coming back to our profitability model that we presented last year where we have three sections here, the scale effects, the efficiency measures, and then the portfolio management. And how we then have succeeded to deliver that during the year is that we have improved our gross margin very much last year based on the scale effects. But we also do efficiency measures. We have, since a couple of years now, started to measure procurement. This is maybe not a super, super impressive number, but it is a number where we actually take down cost on procurement. And we start to measure it, and we see it as a very important part of the package. OPEX is growing.
It's growing 20%, and sales is growing 23%, something that will be hopefully coming through better over the years. We need to do that. Right now, focus is, as we have said, very much on expansion both in the market but also in capacity. And that makes it difficult to do everything on cost at this point. But as we mature, we are also thinking about, as Micael talked about, efficiency measures to bring in there. I also wanted to go back and remind us a little bit on the profitability model and relate it to our different business areas. So what is sort of the drivers in aeronautics? Well, there are scale effects when T7 and Gripen is growing. There is contribution from new contracts that will help to support the margin. We have the civil business that is still negative.
We have said that that will be negative throughout the 2025 year and the same with T7. So those will come into black numbers over time. We know that the civil business will come into black numbers because we have signed new contracts and done the reshaping that will deliver us into that state. Then we have if we can grow and if we can then do more in the aviation services, that is a very profitable business that can also support the average number for Aeronautics. If we look at Dynamics, sales growth is important. They are growing very hard, but they also have a lot of bidding processes and a lot of expansion. A more stable production and getting into the higher capacity will be the main driver for margin and EBIT expansion over time.
On the sort of negative side of Dynamics is that it is still you think about it as a production engine, but it is still also a company that has a lot of R&D. So the more R&D we do on new anti-tank weapons or missile systems, etc., that will also put some pressure. And this is important, of course, to be relevant also down the road. Surveillance, we did see, and we do believe that the scale effects from growth are important. We could see that throughout the previous year. More standardization, more efficiency, and more improved project execution is something that also has come through. And we continue to work. It is a very project and people-oriented organization. The multidomestic will both be a pressure on margin as we expand, but it also improves margin as we expand.
So Germany is a good example where we build up infrastructure and presence, but also we get very good solid contracts. And then, of course, if any of the units, Surveillance is also going to have a negative push on this, all these positives on the R&D because we are doing a lot of R&D in there. And this is just reminding us what we have talked about already a year ago. Kockums, I didn't say that in the previous presentation, but they had a very solid and very good profitability margin and profit. And we have said that Kockums should be between 8%-10%. They should be just below 10% as Aeronautics and Dynamics and Surveillance will be above 10%. That's how we should think in general. And now they outbeat us all in a sense.
But it is very much driven by international and surface deals in previous years. So I think that's something to remember. The submarine business, that solid core business is not driving up the margin in Kockums. And they will not do that over time. So surface and international shows that we can do higher margins occasionally in Kockums, but it's not something we should expect as a strong driver. Enough about our profitability model and that we are executing and we are following this and we haven't changed over time. We did say, and we still believe, and we are continuing on that journey, that two years ago, when we started to talk about this, our margin is too low. It needs to improve. And that has not changed. And we are disciplined. But it needs to change in a way that is sustainable.
We are not going to jeopardize just to make good numbers for a year. The sustainability of the profitability over time. CapEx, an extremely important part of making sure we can grow, is to invest. And we have two very clear and good examples that Micael presented both in ground combat and in surveillance. Surveillance and ground combat is the majority of the investments. They are probably more or less 60%-70% of the investments compared to then the rest of common IT and Aeronautics and in Kockums. And that is because the growth is also so heavy in these two units. And the backlog is coming in so fast. We have 21 units under the VAs in total. And they are pretty much all growing. So there's not one specific only that needs to invest. So there are some big chunks. And then we have some small increases.
If you have 21 units and pretty much 20 are growing, you need to also make sure that they can grow. So this is going to impact this. We did say last year that we would grow in investments. I did say that it came out pretty much where we expected. But we also showed a number last year that was lower than this number on what we predict that the 2023 and 2027 average would be. And we have increased that. So last year, we said, "This number, we believe, is enough to grow 10% CAGR over the period 2023-2027." Now we say we're going to grow 15%. And we will need to invest more to cater for that growth. But as I said, we are very disciplined.
We try to front-load, but not without losing control to make sure we can build capacity and deliver as fast as possible. So that leads into cash flow. Cash flow management is, of course, extremely important. The view we have is that we should be able to drive this company forward, including these increases in investments, with a positive cash flow. We have said in our quarter report that the next two years will have higher pressure from these investments as we are trying to front-load them, and they become a little bit higher. But we are also growing faster than we did, say, one year ago. We said we're going to grow 15% in 2023. We ended up with 23%. And now we have a growth target of then 12%-16% for next year. So this is pushing investments up.
But on the other hand, we are managing through higher EBITDA and also then a good control of our net working capital. And as you see on these numbers, we have managed the pressure on working capital, the lower part of this presentation. And that means also that the key metrics there, the net working capital to sales, is going down. We believe that we have good control of both payments, customer payments, customer prepayments, and then outflows for suppliers together with the inventory buildup that we need to do in a good way. And back again, when we started a couple of years ago and the war came, we said, "Fill the barns." That is actually we pushed up inventory to a level that is probably more relevant when we look one year or two years in front of us of being more normal.
That is also something that helped us in this journey. The return on capital employed is increasing. It is hampered by the big cash and short-term investment portfolio that we have. But it is improving, which I also think is important for both me and the shareholders, hopefully. The remainder of the covenant, we have a target. We have kept that target. It's a minimum 70% cumulative over the 2023-2027. As you see on this picture, it's calculated as an operational metric. This is also how we measure and drive internally. So EBITDA, less the things that you need to add back to cash and amortizations and items not included in the cash flow. Then we look at the net working capital. Then we take out the CapEx. Last year, we were 74% above this average.
We will have a bit more pressure in the next two years. And then it will be probably less pressure from investments in the years after that. That's how we look at it to deliver on this 15% sales CAGR between 2023 and 2027. We have a solid balance sheet. And I think the purpose of having a solid financial position could be many. But for us, it is the combination of what we look on this. So one single thing, you may be able to handle in a different way.
But to have the flexibility on investments in combination with the M&A that we are doing and may want to do also going forward with being flexible and resilient no matter what happens really in the world, together with what kind of opportunities can come out of partnerships in the future, that gives us something, a portfolio of things that we want to be able to handle having this strong balance sheet. We want to be prepared. And we have the opportunity to do what's best to grow this company and make it even more profitable if we get the chance. And that's why this balance sheet and this strong position is not only good, it's important for us going forward. Finalizing from my side, the medium-term targets. So they, in one way, look the same. And we have phrased them the same.
The content of how they are driven, the white text is the same as last year. We have then upgraded, we said, from 2023 to 2027 CAGR when we stood here one year ago. We said it would be 10%. Things are pushing very good in the right direction. So even though there's a lot of pressure on our employees to deliver, to grow capacity, to sell, things are doing very well on the top line. And percent, very, very positive thing, really. We still see, and nothing has happened with the model and how we steer and drive our bidding processes into how we drive our costs and how we look at things, that we can still make the margin improvement over these years. And that means that EBIT will grow higher than sales still throughout this journey, as Micael also said.
And then even if we have this increased CapEx then and also in the short term a bit more than maybe we expected a year ago, we will still manage to do a cash conversion above 70% through the cumulative of this period, 2023-2027. So in reality, only one number has changed, 10-15. But what it means on bottom line, on EPS, and actual number in cash flow, it's, of course, quite a lot if we succeed with this target, which we are super determined to do. And we are in a good way delivering on it. Thank you. I'll hand over to Micael. I stand here and let you come up.
Please remain.
I'll remain.
So, not being long now, we'll take Q&As quickly. Shortly, I mean. In essence, the markets will grow long term. That's what we are adjusting to. I hope we will take even more steps in handshakes with governments. We are having a step change in our growth journey that affects everything we do, that we've tried to explain today. We are prepared to invest in a professional way, taking this company to another level. Everything is about the market positions, which I hope I've described that we're doing in a proper way and that we are actually taking market shares now. We need to work with other companies. Christian showed a few here like MBDA, Embraer, Helsing, Boeing, and so forth, Babcock, much about here and now, a lot of initiatives, but also doing many really interesting things on the R&D side.
Combination with organic growth and M&As will continue. We are looking, of course, in our main markets to continue to do M&As if it fits our portfolio or will give us another position to deliver to the customers. We haven't talked too much about that. But that has never been more important. It's always important. You have your commitments. You have your milestones when you have to deliver. But the end user is shouting and screaming to get stuff now. And that means that the companies that will have the capability to deliver on time with reasonable lead times will take market shares. The other guys will not. So that's why we have that as a thing on every group management meeting, on every day we do things. It's all about supporting that.
And then the whole ecosystem—looking at the tension in the world—is a big part of our work right now to have a resilient supply chain and manage the cost included in that work. And then our fantastic employees that are supporting this journey, they will have friends coming in continuously. And there will be many more competencies now added to the company. You can see at the M&A, some of them we're doing is a little bit of a shortcut getting into competence areas, which we need quickly to deliver new capabilities into the market. So this is one slide summary of where we're heading right now as we speak. And I guess from that, we will take questions, right?
Yes.
This is the guy that's doing a splashdown later today on the slide there, Marcus Wandt. He's happy in space. But I think he's happy coming back as well. I look forward to him to get him back into Saab, of course.
All right. Thank you both again. Thank you for your patience and listening in. We have a bit of time for Q&A. We will focus on taking your questions from the floor first. We have one or two guests online as well. I'm going to ask you to raise your hand and try to keep one or two questions at a minimum so everybody gets a chance to ask questions. We have Chris and Mary here with microphones. They will come to you fast. With that, I will start. Let's go with the first question with Erik. Please state your name and company as well.
Thank you, Merton. Erik Golrang , SEB. I'll start with one question then, quite comprehensive presentation. And it's something you talked about towards the end there, Micael, on those 5% in additional growth meaning quite a lot. So should we interpret that? I know you don't guide on margins, but everything else equal, that also means you now see a higher profitability level at the endpoint there, 2027. So we haven't just sort of shifted the curves in parallel with higher growth, but that there's some incremental leverage on profitability from higher growth.
That's too early to say. That's too early to say. As we said, I think I tried to be very clear on that. We have pressure right now on certain costs of doing expansion, both in market and capacity. We are determined to do an EBIT growth that is higher than the sales growth. And we are determined to make sure it's sustainable. So we want to create a company that doesn't fall back to the old seven numbers and so on. We want to make sure we have a company that has a good foundation for profitability over time. And that is actually superior to finding another couple of tens on the margin just because you can do it for a short period.
Then a follow-up, if I may, drilling down into Dynamics specifically then. The margin the past couple of years have moved quite a bit related to mix. The mix now, and maybe it's tricky, but is it sort of about average? Is it a particularly unfavorable mix? Or where are we now as a starting point then?
Well, if I answer that as well, Micael, if the mix. Sorry for stealing your.
No, no, no.
But I think that if we.
As long as you say the right things.
Yeah. We want all these entities to improve in different ways their margins. I said Dynamics is now sort of more not a floor per se, but they have more opportunities to grow margins than the opposite. Surveillance is on a journey where they've moved up and should move up sort of to more positive territory. Aeronautics should move up. We have also said that. So everyone will contribute in margin expansion in their own mix and not only on a mix on a group level. We want to not be too dependent on the mix over time. That's my statement with that. Make sure that actually the entities deliver at a profitability we think is reasonable. Then the mix will be less an issue to discuss when we get there.
But it's fair to say that we had sort of a specific situation last year with Dynamics, a little bit sort of of a very good mix. And that can't be all the time. But there will be high profitability levels, definitely. Whether it's a percentage up and down now, it's hard to say. But it's going to be high levels, absolutely. And volume will drive this also, of course. When we get all the facilities up and running and demand is increasing, it will be good. But we won't guide exactly on numbers.
Thank you. We had Björn. After Björn, we have Sash.
Björn Enarson, Danske Bank. On the capacity situation in Europe and spending a few days on the Sälen Conference, I mean, it's quite clear views that the politicians are, at least in Sweden, very much in favor of some support to the industry to build out capacity. I guess it's a matter of time until we see that also some kind of decision on this in Europe. So that's my first question, if you agree upon that. But also, how would such a decision look like? And how would this support look like?
Well, on the Swedish side, I mean, I wouldn't speculate too much. I heard statements about sort of state guarantees and what have you in Sälen as you are relating to. That must be agreed in the committees, of course, and brought to political decisions. This was one party stating that. Now, they will probably discuss that in the political system. It could be done in different ways. I mean, if there is an agreement with us to say that we will never allow things to go below a certain critical mass. If you invest and take risk in the world markets, so to say, we will always say that this is the volume we will guarantee. That's what I hope it will be in the end. The political process to get there hasn't been done yet, Swedish side.
Then in the EU, I would say Europe then, there is a European defense industry strategy now being defined, which will come out end of February. That will say a few things about how we must focus on building sovereign capacity in Europe and security of supply and how that should be managed. That could be followed or coupled with EDIP, as we call it, the European Defense Investment Programme, which will be an incentive programme, hopefully, with lots of money in it to make countries, a few, and a few industries come together based on the same requirements to build 155 millimeter or support weapons or sensors or what have you. So that's how I think it will look like. But all of these things haven't happened yet. And we will have elections in the EU, in the Commission this year.
How quickly it will go forward, I don't know. Those are the things I see ahead of us.
Do you think it is a possibility for Sweden to move ahead on the first step, given that there is a consensus among politicians in Sweden to support the industry?
Yeah, I hope so. I think it's a good idea because that's exactly what we need. We can never allow ourselves to dismantle this again. And don't misunderstand me. We are prepared to take risks as an industry based on the market that we see. But if we invest in big capacity in our country, we have to be agreeing that we will never have to sort of let too many people go or have to sort of dismantle the structure again or something like that. So this is sort of a handshake. We're prepared to invest if you commit to this. And this must be done over mandate periods, of course, political mandates.
Thank you. Second question is on the cooperation with France. I mean, you're entering a new segment on anti-tank, more long-range weapons there. Can you say some details on the potential value, market size, etc., versus what you're exposed to towards today?
Too early. But I mean, you look at MBDA and the reach they have in the marketplace and how pan-European they are. This is a good collaboration. And there is potential in this for sure when it comes to anti-tank, both sort of more conventional, I wouldn't call it conventional, but the way we do things today, and more long-range type of weapons. But I can't talk about the complete business case. But it really makes sense to get our people together to do something common in this, to reach markets, but also to be more efficient when it comes to developing the next capability. This is a very important collaboration to us with MBDA.
Thank you.
We have Sash. I actually forgot to remind the moderator on the telco that we have some questions from online viewers as well. We'll try to pick that question after Sash.
Yeah. Thank you, Sash Tusa from Agency Partners. Two questions. I mean, just the first one, in terms of contribution to margins and mix, I may have misunderstood. But I think, Christian, you said that submarines would not improve the margins of Kockums, which implies that submarine margins are fairly much steady state. Is that the correct way of reading it? In which case?
Yeah. I didn't say what level. But they are not on the high level that we have in the quarter four result for Kockums.
You don't expect them to?
It's a business where you work with very big contracts and very close to your customer. That brings a certain sort of level of margin in those programs.
Okay. Thank you. And then following on from the big contracts theme, is there any correlation between the fact that mega contracts are probably a rather smaller proportion of your overall business going forward than they were three four years ago, and the fact that you feel and you're sounding much more confident about your ability to control working capital?
Well, of course. I mean, it's a very important and sound foundation to have this mix of contracts that we have today. But then we're running the campaigns. And those would be excellent upsides when we succeed with the next Gripen order, GlobalEye order. They will add, of course, tremendously well to our company. But we don't base all our sort of investments or our future strategy on that. But we work the campaigns diligently. So this is a good position we're in. We don't have to have sort of a discussion in the company with or without this mega deal to do the sort of important decisions going forward.
On working capital, we don't work that different today on the mega deals. We don't try to work different, Sash, compared to the midsize deals. We try to be actually very equal and be, as Micael mentioned before, cash neutral in a sense, as much as we can over the period.
All right. Great. Moderator, do we have a question from the online?
For questions over the phone, please press star and one. And yes, we have a question from Sam Burgess from Citi. Please go ahead.
Thank you. Morning, guys. Sam Burgess from Citigroup here. Just a couple of questions, if I may. Firstly, as Christian, I think, pointed out, corporate costs were actually a little bit down after some of the one-off items. How should we think about corporate costs for FY24? I know you've been investing in some IT upgrades. And there's been some other expenses. But should we expect flattish again? Or are there other upcoming expenses we should be aware of? And just secondly, on supply chain, are there any particular bottlenecks that you'd call out on supply chain at the moment? Obviously, you've done a lot of inventory stocking. How comfortable are you that that's sufficient to mitigate some of that supply chain risk? Thanks.
Just on corporate costs, I said it was flattish, not down, but in the same range. We have inflation. We don't have a headquarters structure that should grow that fast. We're leaning on the business areas and the business units to actually drive their marketing, sales, and their admin to do things. We do common things together. But if we do something in IT that is common and everyone uses, it's allocated already into their business areas numbers. So therefore, I don't see that we have a high increase in corporate cost over time. We have had this I don't want to call it cleanup. I want to call it that we had to sort out and make sure we were focused on the right customer aspects. And actually, we took over one company now just before year-end on a minority portfolio.
Make sure we do things proper, get the cost down, get the outflow down, and make sure we can deliver to those very important customers in those programs. These are maybe companies we don't want to own over time. But it is important that we get the negative flow out. And that is going to be a big shift also from this year into next year because you have seen quite high numbers on that in what we have presented. Before I let Micael in on supply chain, I just want to say that if you don't wake up every morning and think about a little bit paranoid about supply chain and a little bit afraid that something can happen, you probably will fail.
That's what we do every morning, sort of wake up and think, what can we do differently to make sure we have control of our inflow? I don't know whether you want to.
No, it's an extremely important area to work with every day, of course. I'm happy that we took decisions to have reasonably big stockpiles of certain things so we can actually contract and deliver to customers. But in the end, meanwhile, we'll have to work to see what are the sort of ecosystems that we have to invest in or bring with us investments in that ecosystem. We can talk about this at length, sort of specific components, products, and what have you. But everyone talks about powder and nitrocellulose and things like that. And I think that's super important. I think it's a wake-up that people have realized that, OK, much of the nitrocellulose is now sort of based from cotton from China. And what happens if they sort of cut that supply? We don't do nitrocellulose ourselves.
But there are companies doing that that quickly needs to go into making powder. And then we are prepared to stockpile powder because that you can do. But then it's about sort of boosting that ecosystem. Fortunately, we have a company, Eurenco, in Sweden doing powder for us. But they are also dependent on things that I mentioned. So these things we're working with to make sure that we have other ways of supporting the whole value chain, doing nitrocellulose from wood instead of cotton, for example, and maybe to have that within Europe, at least, as a capability. And then I think NATO has to think about this. Where do we put security of supply hubs as capability targets? Who should be responsible for having a hub on the powder side or certain materials that can quickly be used to ramp up production of certain systems?
That is not sort of done yet. But there's interesting discussions around that. But yeah, there's not one specific. But since we're talking so much about supply of ammunition, ammunitions of different sources, I think I want to point out how important these value chains are.
Great. Thank you, guys.
Thank you.
We have some questions from the online viewers. I have actually three questions from Aymeric from Kepler Cheuvreux. So I'm going to shoot the first two to you, Micael, the first one. And Aymeric is wondering how much of the 2023 sales were directly attributable to Ukraine. And is there something you can say about the commitment of the Western countries to Ukraine, how long they will continue helping Ukraine, and the ongoing U.S. elections discussions on that? So interested to know your views on that.
I'm also interested, Micael.
Those are big questions. But I mean, it's a very scary situation. I think I mentioned that. I mean, if U.S. disconnected support to Ukraine, we are in trouble in Europe. Now, Europe will take and have taken steps now to continue to support, eventually, Ukraine. There's still a EUR 20 billion package when it comes to direct sort of weapon systems and all that. That needs to be sort of also decided. But we need U.S. to have a sustainable support to Ukraine. And it cannot happen that they won't continue to do that. I really hope so. Meanwhile, we have to step up, as I said. We have to do more and do it more in Europe to have the resilience and deterrence need and also to support Ukraine.
So I mean, this is a year now with so many elections in the Commission, in the U.S., in many countries. So I hope things sort of settle a bit so we know sort of the foundation of what we're doing. But Europe has to step up. U.S. have to decide in the right direction. And personally, I can feel it's ridiculous to do this as a political maneuver to. It's all about the southern border. And if you look at the money, we're talking $60 billion related to Ukraine support. And what is it? $600 million when it comes to the U.S. southern border? So it's completely disproportional. I can just hope as everyone else that they take the right decision.
I don't have an aggregated number exactly on how much of our revenue is associated with Ukraine because that's impossible because we don't even know sometimes which parts are donated to Ukraine from the countries we deliver to. So that's impossible to aggregate. The day we have direct channels, which we're working, I can sort of say what the company is providing to Ukraine. But there is no such number today.
Thank you. So to you, Christian, from Aymeric here again, can you talk a bit about the M&As we have done and also how you view which have been mostly focused on AI and technology companies? But how do you see the M&A pipeline going forward? And would you consider being able to do some larger deals? Or do we have some larger deals in the pipeline? And how would you see the trade-off between our financial position versus the valuation or price tag for such a company?
I think the amount is less important. I'm not going to say we're looking at the big companies right now or if we're not. But the important thing is, of course, the valuation and that we contain and secure still a good financial position for the group. You can buy something that is loss-making. And you can buy something that is actually cash-generating. More importantly, is how can we strategically support Saab in this journey of grabbing market, either through market access, capacity, or technology? And we want to do these in our strategic markets primarily. If there's something in another market that is so interesting, we will look at it. But we focus on our strategic countries. We focus on our core areas. And we focus on enabling technology, market access, or capacity.
Honestly, when we look at our pipeline and we work with our pipeline, we don't start saying, this is too small or this is too big. We start to say, does it fit our strategic agenda?
Thank you. One final question from me. Then I will go back to the floor and see if we have more questions. One question about the T-7 program here. Can you quantify or elaborate on the T-7 potential when that program is on full capacity and when that would be?
Well, I think the information we have is that the so-called Milestone C, which is sort of when the real production starts ramping up in the U.S. and the type certificate is done, is late 2025, early 2026. So it will be a while with sort of lower volumes up until then. But then again, we have 350 aircraft on order. And Boeing is estimating a couple of thousand aircraft to be sort of manufactured. So that's the potential of this. So it will be an excellent program. It's just taking a little bit, frustratingly, more time to get there than we anticipated.
Perfect. Thank you. Do we have more questions from the floor here? And then we could get that. Micael from.
Hi. Good morning. A couple of questions on the guidance and targets. First of all, I mean, the long-term targets have been upgraded this morning to 15%. I just want to sort of double-check the math here. It's a quite substantial upgrade on your 2027 sales potential, roughly 20%, 25%. Is that correct calculation? Or have I missed something?
Well, yeah, I haven't done that calculation properly. You can look at it afterwards. But it is for the CAGR. We started coming out of 2022-2027. And we had said 10%. And now we say 15%. And it will be a bigger number in the end, absolutely. I haven't checked, actually, if it's 25% higher number between those. But you're probably right because I know you're good at math.
What are the main assumptions to reach those levels because it's a quite substantial compounding effect that you will achieve?
Yeah, well, we started out having 23% growth instead of 15% last year. And that's included in this number. And now we have said 12%-16% for this year. And we have a very good market position. We have a very good backlog position. And we see that the requests and potential opportunities are very good out there. I mean, as I said, in quarter four, we work a lot on different offers. But we don't know if we're going to win them yet. But there is a lot of potential out there to do more.
But look at the backlog and how it spreads out. And look at the numbers that I showed on how the step has been taken to spend more money in the European perspective, adding $500 billion aggregated over this time period. And what we see on the demand side for certain things that we have in our core areas, I mean, all that comes together to say that, OK, we can take another step.
Well, you're never satisfied. So last year, when we said 10%, you said, are you not too cautious? And now we say 15%. You say, are you not too aggressive? So I'm just joking.
I don't think it's aggressive, no. OK, fair enough. And this is without mega orders, right?
We have very little sort of assumptions on really big contracts in that. It depends on mega orders. I mean, some large contracts, according to the definition, of course. But it's not, no, we're not basing this on winning this and that and this deal that are huge. No, that is an upside.
OK. When it comes to cautious assumptions, looking at the guidance, 12%-16% growth, that's higher than consensus, of course. But you also have 19% higher order backlog for delivery and recognition in 2024. So from that perspective, it looks a bit cautious.
OK. But I would be a little bit careful there because, as I said, the more we fill up our production capacity, the harder it is to get a quick order in and make that into sales. So until we have built up more capacity and until we move into sort of a bigger capacity in general, it's going to be harder to consume order into sales in the same year.
Great. Do we have any more questions from the floor?
Sash.
Thank you. I've just got to follow up on the comments you made about your position in the U.S. market. I think you said you were being seen now as being a competitive player. That can sort of be read two ways, either that you're now very credible and or that you're actually seen as being big enough to be dangerous and hence that the OEMs want to start crushing you. Which do you worry about more?
No, I see it as a very positive. We've had sort of collaboration. We still have collaborations that are important to us. But then we've been trying to find the niche products on certain platforms like a radar on the U.S. carrier, for example, and stuff like that. There are other programs coming up with the way we are working where we will be very efficient in the way we go about things, where I think we can win if I put it this way, big and niche programs as a player in the U.S. market. Will we win all of the big ones? No, of course not. I mean, there will be a huge competition in the U.S. market. And they are quite good at using their states and all that to accomplish leverage.
But of course, we will win bigger contracts and more sophisticated contracts in the U.S., being who we are today. I can't be more quantified than that. That is not a negative thing that we have become so dangerous to them so they will try and crush us so we have to leave. It's not like that. But we will be very U.S. I mean, this is Saab Inc. U.S. This is totally, technically, a U.S. company, even though it's 100% owned by Saab. It's a technically U.S. company, which gives us a position in the market that is excellent.
Thank you. Just a follow-up on commercial air structures. You talked about having renegotiated contracts, which should help you. I think you published that you've done that with Boeing. Are there any contracts that still can be renegotiated to take advantage of the clear commercial pressures on the primes in the upcycle?
There will be, I mean, there will be discussions, of course. We have contracts ongoing with Airbus. And there will be new contracts coming out, both from Boeing and Airbus. And we will look at them with the perspective we had so far, making sure that we make profit and not loss.
Thank you.
We have one question here from Björn.
Yeah, Björn Enarson, Danske Bank. One question. I'm thinking about if I have underestimated the impact from NATO. And I mean, I'm not thinking about the specific order received or the request for information on GlobalEye, et cetera, et cetera, but more a little bit on the US question and also on your success in Germany. I mean, you have invested. And you had a strong position. And that is strengthening. But do you believe there is something linked to NATO in this success at all? I mean, Sweden turning into a member state, is that also helping you out in these core markets?
I see this as a positive thing. But we learn as we go. I mean, NSPA, the acquisition authority within NATO, is not really known to be acquiring so many things sort of for the NATO or for a few NATO countries. But recently, because of the situation in the world and the Ukraine thing, they have been appointed to acquire things that benefit us. And we didn't really see that coming so quickly, like 84 Carl-Gustaf and RBS 70, all these things. Is there more to come in that direction? I don't know. Normally, the nations will have to take care of the Article 3 strong defense thing.
And what I've said before is that being NATO is different than because no one will try and say that we're not sort of trustworthy or we will go away and leave them and all that because we connected to the whole commitment of Article 5, which is strong. But this thing with NSPA is really positive. I hope more will come. But then it's another the capability development plan of NATO is also something we get some insight into, which we didn't have before. So we can, of course, look at that and say, this capability will be needed by a few countries. We are strong in that. So we can actually direct our R&D in that direction to be sort of applicable to what's being procured. So positive thing directions. Then again, competition. There will be companies, industries coming to Sweden.
This is an open market, I would say, to a large extent. But now seeing us as a NATO country, and now it's sort of a free market, which it is. But it's not like that in other countries. So there will be competition still. So one shouldn't overexaggerate it. But it's been very positive to us so far, being only an invitee.
Thank you.
The time is 11:30 A.M. We are right according to the plan. I would like to actually close the Q&A session right now and also thank everybody that's here today and also the viewers that have listened in. There will be an on-demand version of this webcast later. We will also put the presentation material from this strategy session later. So with that, I would like to thank you for your attention and interest in Saab.