THIRD-QUARTER AND FIRST NINE MONTHS 2018 REVENUE€¦ · LEAP-1C Around 120 flight hours logged to...

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THIRD-QUARTER AND FIRST NINE MONTHS 2018

REVENUE


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> FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements relating to Safran, Zodiac Aerospace and their combined businesses, which do not refer to historical facts but refer to expectations based on

management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance, or events to differ materially from those

included in such statements. These statements or disclosures may discuss goals, intentions and expectations as to future trends, synergies, value accretions, plans, events, results of operations or

financial condition, or state other information relating to Safran, Zodiac Aerospace and their combined businesses, based on current beliefs of management as well as assumptions made by, and

information currently available to, management. Forward-looking statements generally will be accompanied by words such as “anticipate,” “believe,” “plan,” “could,” “would,” “estimate,” “expect,”

“forecast,” “guidance,” “intend,” “may,” “possible,” “potential,” “predict,” “project” or other similar words, phrases or expressions. Many of these risks and uncertainties relate to factors that are

beyond Safran’s or Zodiac Aerospace’s control. Therefore, investors and shareholders should not place undue reliance on such statements. Factors that could cause actual results to differ materially

from those in the forward-looking statements include, but are not limited to: uncertainties related in particular to the economic, financial, competitive, tax or regulatory environment; the risks that the

new businesses will not be integrated successfully or that the combined company will not realize estimated cost savings and synergies; Safran’s or Zodiac Aerospace’s ability to successfully

implement and complete its plans and strategies and to meet its targets; the benefits from Safran’s or Zodiac Aerospace’s (and their combined businesses) plans and strategies being less than

anticipated; and the risks described in the registration document (document de référence). The foregoing list of factors is not exhaustive. Forward-looking statements speak only as of the date they

are made. Safran and Zodiac Aerospace do not assume any obligation to update any public information or forward-looking statement in this document to reflect events or circumstances after the

date of this document, except as may be required by applicable laws.

> USE OF NON-GAAP FINANCIAL INFORMATION

This document contains supplemental non-GAAP financial information. Readers are cautioned that these measures are unaudited and not directly reflected in the Group’s financial statements as

prepared under International Financial Reporting Standards and should not be considered as a substitute for GAAP financial measures. In addition, such non-GAAP financial measures may not be

comparable to similarly titled information from other companies.

Disclaimer

2 Safran / Q3 2018 revenue / October 23, 2018


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Safran / Q3 2018 revenue / October 23, 20183

Q3 AND 9M 2018 HIGHLIGHTS

Philippe PETITCOLIN - CEO

1


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Revenue highlights (Q3 and 9m 2017 restated for the application of IFRS 15)

4

Q3 2017 Q3 2018

5,348

3,679

Q3 revenue (€M)

Q3 revenue

Reported revenue up 45.4% including Zodiac

Aerospace contribution of Euro 1,200 million

Organic* growth of 11.4% supported by all activities


+11.4%

organic*

+10.5%

organic*

9m revenue

Reported revenue up 30.9% including Zodiac Aerospace seven-

month contribution of Euro 2,716 million

Organic* growth of 10.5% driven by broad-based momentum in

aerospace and defense activities

9m 2017 9m 2018

11,349

14,854

9m revenue (€M)

+30.9%+45.4%

*Excluding change in scope (notably

the contribution of Zodiac Aerospace)

and FX impacts

On track to meet 2018 revenue outlook


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5

Update on CFM56 and LEAP programs

Increasing production of narrowbody enginesCombined shipments of CFM56 and LEAP engines reached 1,575 units in 9m 2018, up 18%

compared with 1,333 in 9m 2017

LEAP ramp up 741 LEAP delivered in 9m 2018 compared with 257 engines in 9m 2017

Consistent increase in deliveries: Q1: 186 ; Q2: 252 ; Q3: 303

Targeting around 1,100 LEAP engines deliveries in 2018

LEAP-1A In operations at 32 airlines representing 279 aircraft with more than 1.5 million flight hours

accumulated to date

LEAP-1B In operations at 43 airlines representing 224 aircraft with more than 750,000 flight hours accumulated

to date

LEAP-1CAround 120 flight hours logged to date

CFM56 progressive ramp down 834 CFM56 engines deliveries in 9m 2018 (down from 1,076 in 9m 2017) of which 243 CFM56

engines deliveries in Q3-18 (down from 366 in Q3-17)

Targeting around 1,000 CFM56 engines in 2018

LEAP rolling line

LEAP module fan



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Orders and commitments for LEAP

2,357 LEAP orders and commitments taken in 9m 2018

Backlog of 15,239 LEAP engines at end of September

Civil aftermarket growth: +14.7% (in $) in 9m 2018 vs. 9m 2017

YoY variation: Q1 +16.4% / Q2 +8.8% / Q3 +19.2%

Consistent growth of spare parts sales year to date

Quarterly variations of civil aftermarket sales driven by variations of revenue recognition for services

Civil aftermarket expected to increase in the 10-12% range based on the positive momentum of spare

parts sales and on a slow-down in revenue recognition for services in Q4 2018

Silvercrest

Agreement between Textron Aviation and NetJets® for the option to purchase up to 150 Cessna

Citation Hemisphere® business jets powered by Safran’s Silvercrest engine

Q3 2018 business highlights


CFM56

Engine maintenance


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Helicopter turbines

Selected by Zunum Aero (startup funded by Boeing HorizonX and JetBlue Technology Ventures)

to provide an Ardiden 3 engine for its hybrid-to-electric commercial aircraft

Nacelles

Delivery of the first A330neo nacelles to Airbus in Q3 2018

Aircraft Interiors

Selected by a major US airline to provide Optima business class seats for its Boeing 787 linefit

and retrofit wide-body fleet

Signature of several significant carbon brakes contracts

Including Sun Express and Blue Air for 737MAX fleets

Q3 2018 business highlights


A330neo

Carbon brakes


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Q3 AND 9M 2018 REVENUE

Bernard DELPIT – Group CFO

2


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Foreword


Application of IFRS 15

All figures are presented in application of IFRS 15 and comparisons

are established against Q3 2017 and 9M 2017 figures restated for

the application of IFRS 15.

Adjusted data

All revenue figures in this presentation represent adjusted

data(1).

To reflect the Group’s actual economic performance and

enable it to be monitored and benchmarked against

competitors, Safran prepares an adjusted revenue.

Safran’s consolidated revenue has been adjusted for the

impact of the mark-to-market of foreign currency

derivatives, in order to better reflect the economic

substance of the Group's overall foreign currency risk

hedging strategy:

revenue net of purchases denominated in

foreign currencies is measured using the

effective hedged rate, i.e., including the costs

of the hedging strategy,

Consolidation of Zodiac Aerospace

Zodiac Aerospace is fully consolidated in Safran’s financial

statements starting March 1, 2018.

Safran 9m 2018 revenue includes seven months of revenue from

Zodiac Aerospace.

Organic growth

Organic variations were determined by excluding the effect of

changes in scope of consolidation (notably the contribution of

Zodiac Aerospace) and the impact of foreign currency variations.

(1) See slide 21 for bridge with consolidated and adjusted income statements


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Foreign exchange effects


Translation effect: foreign currencies translated into €

Positive impact mainly from USD in Q3 2018

Negative impact mainly from USD in 9m 2018

Impact on Revenues and Return on Sales

Transaction effect: mismatch between $ sales and € costs is hedged

Positive impact from hedged $ as planned

Impact on Profits

Q3 2017 Q3 2018

$1.17 $1.16

Q3 2017 Q3 2018

$1.21 $1.18

Average spot rate

Hedge rate

9m 2017 9m 2018

$1.11 $1.20


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Q3 2018 revenue


Q3 2018Currency

impact

Q3 2018

at Q3 2017

scope

Changes in

scopeQ3 2017 Organic

variation

Q3 2018 at

Q3 2017 scope

and exchange

rates

3,679420 4,099 52 4,151

1,197 5,348

(in M€)

Organic growth: +11.4%

Propulsion: +12.1%

Aircraft Equipment: +10.9%

Defense: +10.0%

Currency impact: +1.4%

Positive impact mainly from USD

Scope: +32.6%

€1,200M related to the contribution from

Zodiac Aerospace

+11.4%

+45.4%


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9m 2018 revenue


Currency

impact

9m 2018

at 9m 2017

scope

Changes in

scope9m 2017 Organic

variation

9m 2018 at

9m 2017 scope

and exchange

rates

9m 2018

11,3491,196 12,545

(393)

12,152

2,702 14,854

(in M€)

Organic growth: +10.5%

Propulsion: +12.6%

Aircraft Equipment: +7.2%

Defense: +9.4%

Currency impact: (3.5)%

Negative translation effect mainly from the

weakening of the USD vs the Euro

Scope: +23.9%

€2,716M related to the seven-month

contribution from Zodiac Aerospace

+10.5%

+30.9%


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Q3 2018 revenue by activity


Adjusted data(in Euro million)

Q3 2017Restated for

IFRS 15

Q3 2018Change

reported

Change

organic

Aerospace

propulsion2,196 2,491 13.4% 12.1%

Aircraft equipment 1,198 1,345 12.3% 10.9%

Defense 279 309 10.8% 10.0%

Aerosystems na 581 na na

Aircraft Interiors na 619 na na

Others 6 3 n/s n/s

Safran 3,679 5,348 45.4% 11.4%

Organic growth drivers

Aerospace Propulsion

> Higher sales of narrowbody engines (546 deliveries compared with 476 in Q3 2017), driven by

growing volumes of LEAP (303 deliveries compared with 110 in Q3 2017) and progressive

ramp down of CFM56 (243 units compared with 366 in Q3 2017)

> Civil aftermarket (in USD) up 19.2% mainly driven by double digits growth in spare parts for

CFM56 as well as by an increase in services revenue

Aircraft Equipment

> OE revenue up 5.7% (organic) thanks to the higher contribution of nacelles (nacelles for LEAP-

powered A320neo, nacelles for A330neo) and the increase in landing gear shipments for 787

> Service revenue up 22.1% (organic) driven by continuing momentum in carbon brakes as well

as by higher sales of spares and MRO for nacelles and landing gear systems

Defense: growth driven by military sales (guidance and sighting systems, portable

optronics)

Offsetting factors

Lower volumes of high thrust engines modules (notably GE90) and M88 engines

deliveries (7 units in Q3-18 vs 12 in Q3-17)

Helicopter turbines support activities: lower revenue recognition for long term service

contracts during the quarter

Lower A380 volumes impacted nacelles and wiring OE sales

Zodiac Aerospace Aerosystems: positive momentum in all activities

Aircraft interiors: increased contribution of Cabin activities offset by lower volumes in

Seats (due to the commercial impacts of previous design and execution issues)


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9m 2018 revenue by activity


Organic growth drivers

Aerospace Propulsion

> OE: higher civil engines sales mainly driven by narrowbody engines volumes (+18%)

including 741 LEAP deliveries and 834 CFM56 in 9m 2018

> Civil aftermarket up 14.7% thanks to a double digits growth of the sales of spare parts for

CFM56 over the period

> Higher contribution of helicopter turbines activities

Aircraft Equipment

> OE up 3.5% organically driven by higher nacelles OE sales

> Services increased 15.7% organically thanks to carbon brakes, spares and MRO for nacelles

and landing gear

Defense : growth mainly driven by higher volumes of military products

Offsetting factors

Lower volumes of high thrust engines modules (notably GE90) and M88 engines

deliveries (11 units in 9m 18 vs 24 in 9m 17)

Lower A380 volumes impacted nacelles and wiring OE sales

Zodiac Aerospace

Aerosystems: positive performance coming from Electrical & Cockpit Systems and

Control Systems

Aircraft Interiors: lower sales in Seats, notably due to the commercial impacts of

previous design and execution issues, were partially offset by the positive organic

contribution of Cabin activities


9m 2017Restated for IFRS

15

9m 2018Change

reported

Change

organic

Aerospace

propulsion6,610 7,235 9.5% 12.6%

Aircraft equipment 3,834 3,930 2.5% 7.2%

Defense 891 960 7.7% 9.4%

Aerosystems* na 1,323 na na

Aircraft Interiors* na 1,393 na na

Others 14 13 n/s n/s

Safran 11,349 14,854 30.9% 10.5%

*For the March to September 2018 period


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7.3 7.7 7.4

5.06.0

1.4

3.8

2017 2018 2019 2020 2021

FX Hedging: $26.1bn hedge portfolio* (October 12, 2018)


€/$ hedge

rate target1.21 1.18 1.16-1.18 1.16-1.18 1.16-1.20

(in $Bn)

*Approx. 45% of Safran US$ revenue are naturally hedged by US$ procurement

Annual average exposure estimated at $8.8bn starting 2019

reflecting the growth of $-exposed businesses and the inclusion

of former Zodiac Aerospace activities

2019

$7.4bn achieved through forward sales and knock

out options to rise to $8.8bn at a target rate

between $1.16 and $1.18

o Knock out options barriers set at various levels between

$1.25 and $1.32 with maturities up to end 2019

2020

$5.0bn achieved through forward sales and knock

out options to rise to $8.8bn at a target rate

between $1.16 and $1.18


$1.27 and $1.32 with maturities up to mid 2020

2021

$6.0bn achieved through knock out options


$1.28 and $1.33 with maturities up to mid-2020


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16

OUTLOOK

Philippe PETITCOLIN - CEO

3



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Full-year 2018 outlook confirmed


2018 outlook is established considering the full application of the new IFRS15 revenue recognition standard.

Compared to its 2017 estimated restated key metrics for the application of IFRS 15, Safran (excluding Zodiac

Aerospace) expects :

Adjusted revenue to grow on an organic basis in the range 7% to 9%. At an estimated average spot rate of USD 1.21

to the Euro in 2018, adjusted revenue is expected to grow in the mid-single digits.

Adjusted recurring operating income to grow around 20% at a hedged rate of USD 1.18 to the Euro.

Free cash flow to be comfortably above 50% of adjusted recurring operating income, an element of uncertainty being

the rhythm of payments by state-clients

Safran expects from Zodiac Aerospace’s businesses (consolidated for 10 months in 2018) a contribution in the range:

€3.6Bn to €4Bn (at an estimated average spot rate of USD 1.21 to the Euro in 2018) to its adjusted revenue

€260M to €300M (at a hedged rate of USD 1.18 to the Euro from 09/01/2018) to its adjusted recurring operating income

€80M to €120M to its free cash flow


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2018 key assumptions


The 2018 outlook notably benefits from a stronger civil aftermarket growth than the secular high single digits growth trend, from

gross margin improvement of CFM56 OE and from advance payments of export contracts. 2018 assumptions reflect these trends

and are unchanged compared with H1 2018 earnings announcement:

Civil aftermarket growth in the range 10% to 12% taking into account seasonal services expectations in Q4

Transition CFM56 – LEAP: overall negative impact on Propulsion adjusted recurring operating income variation in the range

€100 to 150 million thanks to an improvement of CFM56 gross margin

This estimated negative impact from the transition includes some cautiousness and represents a significant reduction

compared to 2017 and includes:

Lower CFM56 OE volumes

Negative margin on LEAP deliveries

Increase in aerospace OE deliveries despite a fall in high thrust engines modules

Reduction of self-funded R&D of around €150M

Positive impact on recurring operating income after activation and amortisation of capitalized R&D

Capex outflows of a similar level to 2017

Continued benefits from productivity improvements

NB: 2018 assumptions are established considering the full application of the new IFRS15 revenue recognition standard and is based on continuing

operations (Aerospace Propulsion, Aircraft Equipment, Defense, Holding & Others) at the group’s scope as of January 1, 2018.


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19

Q&A

4



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20

ADDITIONAL INFORMATION

5



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Q3 2018 and 9m 2018 consolidated and adjusted revenue

21

Q3 2018

(In Euro million)

Consolidated

revenue

Hedge accounting Business combinations

Adjusted revenueRe-measurement

of revenue

Deferred hedging

gain (loss)

Amortization of

intangible assets

- Sagem/Snecma

PPA impacts -

other business

combinations

Revenue 5,370 (22) n/a n/a n/a 5,348


9m 2018

(In Euro million)

Consolidated

revenue

Hedge accounting Business combinations

Adjusted revenueRe-measurement

of revenue

Deferred hedging

gain (loss)

Amortization of

intangible assets

- Sagem/Snecma

PPA impacts -

other business

combinations

Revenue 14,763 91 n/a n/a n/a 14,854


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Aerospace OE / Services split (excluding Zodiac Aerospace)


Revenue


Q3 2017 Q3 2018 % change

OE Services OE Services OE Services

Propulsion

% of revenue

950

43.3%

1,246

56.7%

1,088

43.7%

1,403

56.3%14.5% 12.6%

Equipment

% of revenue

823

68.7%

375

31.3%

879

65.4%

466

34.6%6.8% 24.3%

Revenue


9m 2017 9m 2018 % change

OE Services OE Services OE Services

Propulsion

% of revenue

2,723

41.2%

3,887

58.8%

3,111

43.0%

4,124

57.0%14.2% 6.1%

Equipment

% of revenue

2,652

69.2%

1,182

30.8%

2,618

66.6%

1,312

33.4%(1.3)% 11.0%


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Quantities of major aerospace programs


Number of units deliveredQ3

2017

Q3

2018%

9m

2017

9m

2018%

CFM56 engines 366 243 (34)% 1,076 834 (22)%

LEAP engines 110 303 175% 257 741 188%

High thrust engines 115 108 (6%) 371 309 (17%)

Helicopter engines 130 175 35% 444 510 15%

M88 engines 12 7 (42)% 24 11 (54)%

787 landing gear sets 33 35 6% 99 109 10%

A350 landing gear sets 19 19 = 62 59 (5)%

A380 nacelles 12 8 (33)% 33 28 (15%)

A330 thrust reversers 25 15 (40)% 77 65 (16)%

A320neo nacelles 38 124 226% 143 296 107%

A320ceo thrust reversers 115 74 (36)% 378 250 (34)%

Small nacelles (biz & regional jets) 113 142 26% 347 451 30%

Zodiac Aerospace

Number of units delivered

Q3

2018

7 months

(March to

Sept. 18)

Lavatories A350 143 384

Spaceflex V2 A320 (lavatories + Galleys) 137 315

Business class seats 576 2,071

Emergency slides A320 1,195 2,491

Primary power distribution system 787 208 504


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2017 adjusted income statement restated for the application of IFRS 15


(In €M) 2017 2017Restated for IFRS 15

Revenue 16,521 15,953

Other recurring operating income and expenses (14,228) (13,928)

Share in profit from joint ventures 177 167

Recurring operating income

% of revenue

2,470

15.0%

2,192

13.7%

Total one-off items (90) (90)

Profit from operations

% of revenue

2,380

14.4%

2,102

13.2%

Net financial income (expense) 26 7

Income tax expense (542) (485)

Profit from continuing operations 1,864 1,624

Profit from discontinued operations 823 831

Profit for the period 2,687 2,455

Profit for the period attributable to non-controlling interests (64) (62)

Profit attributable to owners of the parent

From continuing operations

From discontinued operations

2,623

1,801

822

2,393

1,563

830

EPS (basic in €) 6.39* 5.84*



4.39

2.01

3.81

2.03

EPS (diluted in €)



6.28**

4.31

1.97

5.73**

3.74

1.99

* Based on the weighted average number of shares of

410,241,043 as of Dec 31, 2017

** Based on the weighted average number of shares after

dilution of 417,518,248 as of Dec 31, 2017


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Definition


Civil aftermarket (expressed in USD)

This non-accounting indicator (non-audited) comprises spares and MRO (Maintenance, Repair & Overhaul) revenue for all civil

aircraft engines for Safran Aircraft Engines and its subsidiaries and reflects the Group’s performance in civil aircraft engines

aftermarket compared to the market.


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THIRD-QUARTER AND FIRST NINE MONTHS 2018 REVENUE€¦ · LEAP-1C Around 120 flight hours logged to...

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