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Saab's earnings in 3Q dropped 8 percent

Higher marketing and research and development costs led Saab AB to 8 percent drop in third-quarter net profit, the company said Friday.

Saab posted a profit of 218 million kronor (EUR23.8 million; US$34 million) for the three months ended Sept. 30, down from 237 million kronor in the year-ago period.

Sales rose 13 percent to 4.81 billion kronor (EUR525 million; US$751 million), from 4.26 billion kronor in the same period in 2006, but could not offset the higher costs.

Chief Executive Ake Svensson said that even though the quarter contained few major order bookings, the figure was still high at 4 billion kronor (EUR437 million; US$625 million), showing "proof of Saab's ability to also win smaller and medium-size orders in all its segments."

Saab shares fell 2.5 percent to 154 kronor (EUR16.82; US$24.05), in Stockholm.

In its outlook for the remainder of the year, Saab said it expects growth to be in line with 2006 and an operating margin, including structural costs, to be "slightly higher than last year, assuming no negative effect from the recently announced Swedish defense budget cuts."

In its budget proposal in September, Sweden's center-right government presented plans to cut the country's military spending by a total of 1.95 billion kronor (EUR213 million; US$305 million) by 2010. In addition, it said it could make further cuts of 2 billion to 3 billion kronor (EUR218 million-EUR328 million; US$312 million-US$469 million), but did not specify a timeframe.

Svensson said the move called for "further cutbacks and a continued focus on the military's international missions," creating new opportunities but also the need for Saab to finance technological development and increase its international marketing efforts.

As a result, Saab said it has launched an internal efficiency program to be able to keep its 10 percent operating margin target. The company will aim for savings of around 1 billion kronor (EUR109 million; US$155.86 million) a year by the end of 2010, Svensson said.

Saab sold its automobile division to General Motors Corp. in 2000.

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