By Niklas Pollard

STOCKHOLM (Reuters) -Swedish defence equipment maker Saab reported a slightly bigger-than-expected rise in quarterly operating earnings and maintained its outlook for surging sales and profits this year as countries race to scale up militaries.

Saab repeated on Friday its forecast for sales to grow organically by 15-20% this year, with operating earnings to rise even more.

The maker of defence material including missiles, submarines and the Gripen fighter jet said operating profit rose 25% to 1.33 billion Swedish crowns ($125 million) in the second quarter, just ahead of the 1.29 billion seen by analysts according to LSEG estimates.

The company, which competes with the likes of U.S. giant Lockheed Martin, France’s Dassault Aviation and Britain’s BAE Systems is seeing a boom in demand spurred by global tensions, the war in Ukraine and Sweden’s recent NATO accession.

Saab, which also sells equipment for civilian use to customers such as Airbus and Boeing, said order bookings leapt 176% year-on-year in the quarter, with its backlog of orders hitting a record 182.7 billion crowns.

“This marks the second-highest quarter in terms of order bookings in the company’s history,” CEO Micael Johansson said in a statement.

“The urgent need to provide Ukraine with more support and a clear uplift of European defence capabilities will remain a driver of growth in the industry for many years.”

Saab shares have surged more than 70% this year, adding to strong gains in recent years. The stock was down 1.3% at 0720 GMT.

“Overall, a solid set of results that met ambitious consensus expectations,” Citi analysts said in a note.

“However, given the very high valuation and growth expectations, no guidance upgrades may disappoint. On the other hand, extremely strong orders affirm (the) growth narrative.”

Saab is expanding capacity in Sweden and India and will build a production plant in the United States, though it has yet to select the location. Johansson told Reuters that Saab had roughly added a net 1,600 staff in the first half of the year.

“There’s just an incredible amount of things happening,” he said. “This is something that in general is going well, though it’s not without growing pains.”

(Reporting by Niklas Pollard; Editing by Sherry Jacob-Phillips and Mark Potter)

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