Safran Sa · EURONEXT:SAF
Safran Sa — Investor Day (November 2018)
31 slides from Safran Sa's investor day presentation, Nov 29, 2018
Slide 1: CFM56 / LEAP Transition and Aftermarket
C2 - Restricted CFM56 / LEAP TRANSITION AND AFTERMARKET Olivier ANDRIÈS, SAE CEO François BASTIN, SAE Commercial Engines François PLANAUD, SAE Services & MRO 54 Safran - Capital Markets Day 2018 / November 29, 2018 This document and the information therein are the property of Safran. They must not b
Slide 2: CFM56 / LEAP Transition
C2 - Restricted 1 CFM56 / LEAP TRANSITION François BASTIN, SAE Commercial Engines 55 Safran - Capital Markets Day 2018 / November 29, 2018 This document and the information therein are the property of Safran. They must not be copied or communicated to a third party without the prior written authoriz
Slide 3: LEAP: Technology, Experience & Execution
C2 - Restricted LEAP: Technology, Experience & Execution 2018 COMPOSITE ADVANCED 3D AERO FAN BLADES & CASE Performance Reliability Lightweight & durable Life cycle maint. cost ADVANCED COOLING Same as CFM56 Lightweight & temperature resistant LEAN COMBUSTOR -15% lower fuel Low NOx, durable consumpti
Slide 4: LEAP: since CMD 2016
C2 - Restricted LEAP: since CMD 2016 2018 All performance, noise and emissions A320neo 737 MAX C919 reduction objectives met 73 LEAP customers have accumulated more than LEAP-1A LEAP-1B LEAP-1C 2.5 million Entry into service Entry into service First Flight engine flight hours in August 2016 in May 2
Slide 5: LEAP: the customer's choice
C2 - Restricted LEAP: the customer’s choice 2018 Market shares, as of October 31, 2018 Based on announced orders and selections CFM LEAP 737MAX 100% Single CFM LEAP 737 MAX 8,171 AC source 5,008 (o/w ~7,500 AC to be delivered) 77% Comac 725 A220 580 PW MC-21 A320neo A320neo CFM 1000G 42% 2,438 A320n
Slide 6: LEAP in service: supporting a fleet of more than 500 aircraft
C2 - Restricted LEAP in service: supporting a fleet of more than 500 aircraft… 2018 As of October 31, 2018 A320neo 737 MAX 288 aircraft 231 aircraft 59 Safran - Capital Markets Day 2018 / November 29, 2018 This document and the information therein are the property of Safran. They must not be copied
Slide 7: …with unrivalled utilization
C2 - Restricted …with unrivalled utilization 2018 Already 99.9% dispatch Cornerstone reliability and still improving! ● Engine designed for reliability World Class Utilization, matching CFM56 standard Aircraft not flying Flight hours (h) Levers (in % of fleet in service) Source: Flightradar24 / Aver
Slide 8: Unprecedented ramp-up underway
C2 - Restricted Unprecedented ramp-up underway 2018 In 2016, 77 LEAP deliveries, 1,000+ on top of 1,693 CFM56’s In 2017, 459 LEAP deliveries, 2,000+ 1,800+ on top of 1,444 CFM56’s 1,100+ In 2018 on track to beat 1,100 LEAP engines deliveries, on top 2016 '16 2017 '17 2018e '18 2019e '19 2020e '20 20
Slide 9: Leveraging our Production Management System
C2 - Restricted Leveraging our Production Management System 2018 Extensive investment: added 3 new plants and pulled in a 3rd pulse line Route to Serial Mode in 2018 alone ● Systematic risk analysis & abatement Fully active dual sourcing, adding 3rd or 4th when necessary (forged parts, frames) Watch
Slide 10: A steadily extending footprint
C2 - Restricted A steadily extending footprint 2018 Safran plant development Location Size Country Specialisation Status Queretaro 6,000 m2 Mexico Assembly 2019 Queretaro 31,000 m2 Mexico 3D composites RTM and OGV 2018 Rzeszow 5,000 m2 Poland Compressor Blade machining 2018 Rzeszow 9,300 m2 Poland T
Slide 11: Defining the state of the art of engine assembly
C2 - Restricted Defining the state of the art of engine assembly 2018 2016 2017 2018 All effective today… and more coming! ● 3 LEAP engine pulse lines, 3 fan module rolling lines ● Friendly engine cradles (4 axes, including +/- 110° engine axis rotation) Engine pulse lines Fan rolling lines ● Augmen
Slide 12: Cost reduction: right on track
C2 - Restricted Cost reduction: right on track 2018 Before 1st engine delivery, CMD16 -30% learning curve was expressed in terms of Cost of Production -25% As serial production has started, Cost of Sales metrics becomes more relevant 2016 2017 2018e 2019e 2020e Average cost of sales The achievem
Slide 13: LEAP Cost reduction: within our plants
C2 - Restricted LEAP Cost reduction: within our plants 2018 Levers Examples ● 1B Turbine rear vane Design updates for cost ● Removal of EEC blowers $90k / engine ● 1B Fan frame shroud ● Closed door machining Process Optimization ● Optimization of inspection times ● Rework elimination Leveraging our
Slide 14: Closed door machining: Le Creusot (France)
C2 - Restricted Closed door machining: Le Creusot (France) 2018 Traditional Flexible assisted Flexible automated turbine disk manufacturing manufacturing machining system system ● One piece flow ● 3 machines for one operator ● Batch flow ● 2 machines for one operator ● Automated loading ● One machin
Slide 15: LEAP Cost reduction: with our suppliers
C2 - Restricted LEAP Cost reduction: with our suppliers 2018 Levers Examples 150 3,000 suppliers ● Cone torque metal coating part numbers Design to cost removal, LPT shaft heat treatment optimization Lean manufacturing, ● Turbine disk machining value chain analysis, cycle time reduced 4 process reen
Slide 16: CFM56 / LEAP Transition: the first steps of a success story
C2 - Restricted CFM56 / LEAP Transition: the first steps of a success story 2018 Looking back on 2.5 years and 2.5 million hours of operations, LEAP is already delivering Historic ramp up on all its promises Cost reduction is underway, supported Performance by a strong production is right on target
Slide 17: CFM56 / LEAP Aftermarket
C2 - Restricted 2 CFM56 / LEAP AFTERMARKET François PLANAUD, SAE Services and MRO 70 Safran - Capital Markets Day 2018 / November 29, 2018 This document and the information therein are the property of Safran. They must not be copied or communicated to a third party without the prior written authoriz
Slide 18: CFM56 / LEAP installed base growing
C2 - Restricted CFM56 / LEAP installed base growing 2018 CFM Fleet in service CFM56 / LEAP fleet in service to grow Source: CFM fleet data, agreed airframer LEAP rates 50,000 by 4.5% CAGR until 2025 ● More than 38,000 CFM56 / LEAP engines 40,000 will be in operation in 2025 30,000 Strong CFM56 insta
Slide 19: CFM56 / LEAP different aftermarket dynamics
C2 - Restricted CFM56 / LEAP different aftermarket dynamics 2018 CFM56 LEAP ● Aftermarket business essentially driven ● Increased customer demand for long term, by spare parts sales rate per flight hour agreements > Large choice of Maintenance, > Provides airlines for maintenance cost Repair and Ove
Slide 20: CFM56: -5B/-7B fleet is still a young fleet
C2 - Restricted CFM56: -5B/-7B fleet is still a young fleet 2018 As of 2018 60% of CFM56 -5B/-7B in service have had 0 shop visit CFM56 -5B/-7B fleet split by number of shop visits performed Source: CFM fleet data 60% ~45% ~20% with no SV with no SV with no SV 2018e 2020e 2025e 22,800 ~23,000 ~20,00
Slide 21: CFM56: Spare parts consumption model
C2 - Restricted CFM56: Spare parts consumption model 2018 Shop visit forecast Spare parts usage at shop visit Long term trend Fleet in service Workscope ● Engines in service ● Module exposure ● Utilization, area of operation ● Rebuild standards, Life Limited Parts (LLP) replacement Technical paramet
Slide 22: CFM56: -5B/-7B shop visit outlook
C2 - Restricted CFM56: -5B/-7B shop visit outlook 2018 CFM56 -5B/-7B Worldwide shop visits Source: CFM fleet data 3,000 2,000 1,000 CFM56-5B/-7B shop visits to grow by ~5% CAGR until 2025 0 2015 2020e 2025e Peak over 3,000 shop visits per year expected around 2025 Higher peak level than in CMD16,
Slide 23: CFM56: -5B/-7B shop visit rank distribution
C2 - Restricted CFM56: -5B/-7B shop visit rank distribution 2018 Fleet-wide average timeline for spare parts revenue Proportion of shop visits 1 & 2 Revenue within total of -5B/-7B SV/year 2018e 2025e 75% >66% SV1 SV2 SV3 Entry in service 10 20 Years Shop visits 1 & 2 are main revenue Large prop
Slide 24: CFM56: Spare parts outlook
C2 - Restricted CFM56: Spare parts outlook 2018 Expected CFM56 worldwide spare parts 2017/2018 benefiting from tailwinds consumption profile ($) ● Positive global context: Source: CFM fleet data > Traffic growth and high fleet utilization > Airlines financial health ● Strong MRO activity & high-cont
Slide 25: LEAP: moving to Services with different type of offerings and contracts
C2 - Restricted LEAP: moving to Services with different type 2018 of offerings and contracts Spare parts purchase Rate Per Flight Hour Time & Material ESPH* / ESPO** Spot Sales / Short term agreement Long Term agreement ● Spare parts sales to MRO shops or operators ● Typically 8 to 12 years ● T&M ov
Slide 26: LEAP: Long term contracts performance management
C2 - Restricted LEAP: Long term contracts performance management 2018 Leveraging on our expertise Bringing digital tools and analytics OEM expertise Integrated Data Collection ● Wide range of services ● Larger quantity of Engine data ● Engine design knowledge ● Environment (Weather, routes, …) Predi
Slide 27: ESPH and ESPO illustrative cash profile
C2 - Restricted ESPH and ESPO illustrative cash profile 2018 Engine Services Per Hour (ESPH) Engine Services Per Overhaul (ESPO) Revenue: IFRS15 Sales Cash Flow: Net Billings less Costs Billings: Cash in Costs: Cash out Similar revenue patterns in both cases Improved cash profile for ESPH vs ESP
Slide 28: LEAP: Rate Per Flight Hours agreements portfolio
C2 - Restricted LEAP: Rate Per Flight Hours agreements portfolio 2018 To date, 28% of LEAP engine orders include a signed CFM Rate Per Flight Hour (RPFH) long term agreement ● Split between ESPH and ESPO: 25% ESPH /75% ESPO Within 3/5 years, expected RPFH agreements to represent 60-70% of LEAP insta
Slide 29: LEAP: Shop visits & MRO footprint
C2 - Restricted LEAP: Shop visits & MRO footprint 2018 Worldwide shop visits LEAP worldwide shop visits ● Expect strong ramp-up of shop visits as a result 3,000 of new engines deliveries profile ● ~1,000 shop visits in 2025 2,000 Maintenance activity for Safran ● Long term Services portfolio will tr
Slide 30: CFM56 and LEAP mix of aftermarket revenues
C2 - Restricted CFM56 and LEAP mix of aftermarket revenues 2018 Distribution of CFM56+LEAP aftermarket revenues by nature 88% 12% ~80% ~20% ~70% ~30% 2017 2022e 2025e Spare parts and T&M RPFH Smooth and progressive ramp-up of RPFH contracts Spare parts and T&M will be the main revenue channel up
Slide 31: Civil Aftermarket key messages
C2 - Restricted Civil Aftermarket key messages 2018 ● CFM56 spare parts keep driving civil aftermarket growth until 2025 ● LEAP Services will progressively ramp up and provide the relay for growth High single digit growth for total CFM56 & LEAP aftermarket revenues 84 Safran - Capital Markets Day