Saab's earnings hit by terminated customer contract.

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Swedish defense company Saab -- maker of the Gripen fighter jet -- Friday said second quarter net profits fell almost 40 percent – largely because of terminated customer contract. The company therefore cuts its outlook for the rest of the year.

“Profitability was negatively impacted by a terminated contract in our civil security business and lower capacity utilization pending larger orders. As a consequence, we change our outlook for 2010”, Chief Executive Officer Åke Svensson said.

Previously the company estimated profitability to increase this year compared to 2009, whereas now the profitability is expected to remain at about the same level.

Saab posted a second-quarter net profit of 177 million kronor ($24 million), down from 294 million kronor last year. Revenues fell to around 6 billion kronor from almost 6.3 billion kronor.

Orders of about 220 million kronor were cancelled within Security and Defence Solutions as a result of a terminated civil security contract, the firm said.

Last year Lindköping-based Saab AB, specializes in military defense to civil security, said it would reorganizes into five business areas as the global defense industry is subject to significant changes. The adjustment could also be seen in the light of a long row of lost fighter jet deals.

The company's share dropped almost 2 percent in early morning trading on the Stockholm stock exchange.