Safran Sa · EURONEXT:SAF

Safran Sa — Bank of America Merrill Lynch Global Industrials & EU Autos Conference 2016

34 slides from Safran Sa's conference presentation, Mar 15, 2016

  1. Slide 1: Safran 2015 - 2020

    Safran 2015 - 2020 Bernard Delpit – Group CFO Bank of America Merrill Lynch Global Industrials & EU Autos Conference BoAML | March 15, 2016 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 authori

  2. Slide 2: 5 key themes

    / 5 key themes / 2015 results Strategy update Tomorrow’s key challenge : the CFM56 – LEAP transition CFM aftermarket : in the sweet spot 2020 financial ambition BoAML | March 15, 2016 This document and the information therein are the property of Safran. They must not be copied or communicated to a t

  3. Slide 3: FY 2015 financial highlights

    FY 2015 financial highlights Growing adjusted revenue, including positive $ Adjusted recurring operating income FCF representing 40% of adjusted recurring impact, mainly driven by Aerospace services and at 14.0% of revenue operating income Security +13.4% +16.4% 17,414 2,432 15,355 2,089 +31.6% 974

  4. Slide 4: FY 2015 revenue

    FY 2015 revenue (in €M) +13.4%  Organic growth: +3.9% 1,399 17,352 62 17,414  Driven by momentum in Aerospace services (notably civil aftermarket up 18.9% in $) and in 598 15,953 Security (+11%) 15,355  Currency impact: +9.1%  Significant positive translation effect of USD. +3.9% Positive transl

  5. Slide 5: FY 2015 recurring operating income

    FY 2015 recurring operating income (In €M) +16.4% 64 2,436 (4) 2,432  Main profitability drivers 283 2,372  Strong growth of Aerospace services, 2,089 notably civil aftermarket  Contribution of CFM56 OE  Organic growth in Identification and business solutions activities in Security 13.6% 14.0% 

  6. Slide 6: FY 2015 revenue by activity

    FY 2015 revenue by activity Holding (In €M) FY 2015 Propulsion Equipment Defence Security & others Revenue 17,414 9,319 4,943 1,266 1,878 8 Year-over-year growth in % 13.4% 14.3% 11.2% 3.7% 22.7% na Recurring operating income 2,432 1,833 466 64 151 (82) as a % of revenue 14.0% 19.7% 9.4% 5.1% 8.0% n

  7. Slide 7: Net debt position

    Net debt position (in €M) Net debt at Net debt at  Cash flow from operations Dec 31, 2014 Dec 31, 2015 equals 1.17x recurring EBIT Change Cash flow in WC R&D from ops (60) and Capex  2014 final dividend (€0.64/share) and 2,813 2015 interim dividend (€0.60/share) (1,779) (1,499)  “Acquisitions/Div

  8. Slide 8: 5 key themes

    / 5 key themes / 2015 results Strategy update Tomorrow’s key challenge : the CFM56 – LEAP transition CFM aftermarket : in the sweet spot 2020 financial ambition BoAML | March 15, 2016 This document and the information therein are the property of Safran. They must not be copied or communicated to a t

  9. Slide 9: Market driving forces for Safran

    MARKET DRIVING FORCES FOR SAFRAN The civil aerospace market offers attractive resilient growth perspectives, outperforming world GDP 1 growth Aircraft manufacturers are implementing stepwise product improvement strategies before the next 2 generation aircraft (2030+): incremental innovation is manda

  10. Slide 10: Strategy wrap up

    STRATEGY WRAP UP  The future of Safran is the aerospace and defence markets  The security market has its own characteristics and is becoming more and more digital  For the next 25 years, the CFM partnership with GE will remain the core of our strategy in propulsion  Outside the scope of this Joi

  11. Slide 11: Strategy wrap up

    STRATEGY WRAP UP  Opportunities which will reinforce our footprint in aerospace equipment, with a DNA (High Tech / Tier 1 / recurrent services aftermarket) close to ours will be looked at, with appropriate financial discipline  Our defence business is a niche business and we are happy with it  In

  12. Slide 12: 5 key themes

    / 5 key themes / 2015 results Strategy update Tomorrow’s key challenge : the CFM56 – LEAP transition CFM aftermarket : in the sweet spot 2020 financial ambition BoAML | March 15, 2016 This document and the information therein are the property of Safran. They must not be copied or communicated to a t

  13. Slide 13: LEAP – Best in class

    LEAP – BEST IN CLASS Fuel efficiency NOx Noise Reliability Maint. cost 15% 50% New Same as CFM56 better lower regulation vs. CFM56 vs. CAEP 6 compliant … best in industry (chapter 14) 99.98% Departure reliability  Technology  Materials • New Composites Performance • New Alloys & reliability  Expe

  14. Slide 14: LEAP – Market share

    LEAP – MARKET SHARE As of February 29, 2016 CFM LEAP CFM LEAP 5,217 AC • A320neo 1,571 a/c (55% m.s.) 737MAX 74% • 737 MAX 3,129 a/c 737MAX • C919 517 a/c C919 C919 5,217 a/c C-Series C-Series MC-21 MC-21 PW1000G Series A320neo • A320neo 1,264 a/c (45% m.s.) A320neo A320neo A320neo PW1000G 1,843 AC

  15. Slide 15: LEAP – Right on track

    LEAP – RIGHT ON TRACK 2012 2013 2014 2015 2016 2017 2018 Design 1st engine FTB 1st flight EIS freeze to test LEAP-1A Airbus A320neo Design 1st engine FTB 1st flight EIS freeze to test LEAP-1B Boeing 737 MAX Design 1st engine FTB Roll out 1st flight EIS freeze to test LEAP-1C Comac C919 Engine develo

  16. Slide 16: LEAP – Ramp up

    LEAP – RAMP UP NUMBER OF ENGINES PRODUCED  CFM56 production record level in 2016  LEAP production will reach a 30% higher rate 2,000+  Everything in place to manage 1,650+ 1,612 a smooth transition and ramp-up  Large volumes and steep ramp-up are an opportunity to get costs down faster 2015 2016

  17. Slide 17: LEAP – Ramp up

    LEAP – RAMP UP  100% of suppliers are well known vendors and aero suppliers – 80% are common with CFM56  Redundancy and/or buffer stock for 100% of parts  85% of parts are double sourced  Suppliers Selection - based on three main criterias: Supply Chain performance, Growth capacity (including fi

  18. Slide 18: 5 key themes

    / 5 key themes / 2015 results Strategy update Tomorrow’s key challenge : the CFM56 – LEAP transition CFM aftermarket : in the sweet spot 2020 financial ambition BoAML | March 15, 2016 This document and the information therein are the property of Safran. They must not be copied or communicated to a t

  19. Slide 19: CFM installed base evolution

    CFM INSTALLED BASE EVOLUTION  CFM fleet in service to grow by 4%+ annually Nb of engines CFM Fleet in service over the next decade 40,000 • 25,000 CFM56 engines in operation today • More than 27,000 CFM56 engines will be in 30,000 operation in 2018 20,000  New generation LEAP engines will relay CF

  20. Slide 20: Maintenance activity on CFM56 Gen 2 still growing

    MAINTENANCE ACTIVITY ON CFM56 GEN 2 STILL GROWING As of 2015 As of 2020 As of 2025 19,000 + 22,000 + 18,500 + Gen 2 Gen 2 Gen 2 in service in service in service No shop visit performed on engine One shop visit or more  2015: more than 60% of CFM56 Gen 2 in service have never had a shop visit  2025

  21. Slide 21: Prospects for future CFM56 aftermarket

    PROSPECTS FOR FUTURE CFM56 AFTERMARKET Expected CFM56 spare parts  Main contributors to spare parts Expectedconsumption profile CFM56 spare parts revenue profile consumption are now Gen 2 engine models  In 2016, consumption is expected to have CMD'2013 doubled since 2010, supported by a very favor

  22. Slide 22: 5 key themes

    / 5 key themes / 2015 results Strategy update Tomorrow’s key challenge : the CFM56 – LEAP transition CFM aftermarket : in the sweet spot 2020 financial ambition BoAML | March 15, 2016 This document and the information therein are the property of Safran. They must not be copied or communicated to a t

  23. Slide 23: 2010 – 2015: Consistent growth

    2010 – 2015 : CONSISTENT GROWTH Adjusted revenue Adjusted recurring operating income 2 432 17 414 2 089 15 355 1 788 13 560 14 363 1 471 11 736 10 760 1 189 878 2010 2011 2012 2013 2014 2015 2010 2011 2012 2013 2014 2015 Dividend R&D and CAPEX (tangible and intangible) 576 500 941 1 258 467 400 701

  24. Slide 24: 2020 financial ambition

    2020 FINANCIAL AMBITION MAIN ASSUMPTIONS 2016-2020 VIEW  Scope  Steady organic revenue growth… • 2016 outlook is applicable to the Group’s structure as • Aerospace: OE production ramp-up (narrowbody & of December 31, 2015 and does not take into account widebody, military, helicopters), growth in s

  25. Slide 25: 2020 financial ambition

    2020FINANCIAL AMBITION CFM56 / LEAP OE contribution Cost of production: to gross margin Learning curve of LEAP CFM56 LEAP - 40% CFM56+LEAP Standard cost of production 2015 2016e 2017e 2018e 2019e 2020+ 2016e 2017e 2018e 2019e 2020e  Gradual reduction of CFM56 contribution  Initial production costs

  26. Slide 26: Financial ambition

    FINANCIAL AMBITION Aircraft Equipment Defence Security 15% 15% 15% 10% 10% 10% 5% 5% 5% 0% 0% 0% 2015 2016e 2017e 2015 2017 2018e 2019e 2019 2020e 2015 2016e 2017e 2015 2017 2018e 2019e 2019 2020e 2015 2016e 2017e 2015 2017 2018e 2019e 2019 2020e  Growth in services  Push export sales  Existing c

  27. Slide 27: Financial ambition

    FINANCIAL AMBITION  Temporary headwind from LEAP transition Indicative profile of Group gross margin and expensed R&D  Offsetting factors: growing contribution of civil aftermarket and other businesses OE CFM56 & LEAP  Tailwind from FX Other OE  Propulsion margin to remain in the mid SERVICES to

  28. Slide 28: Capital allocation

    CAPITAL ALLOCATION R&D spending In €M CAPEX spending In €M 1000 1,000 2000 2,000 €2,100M Total R&D effort 1,500 1500 €1,356M 1,000 1000 500 500 500 Total self-funded €495M R&D Capitalized R&D 0 0 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016e 2017e 2018e 2019e 2020e 2015 2016e 2017e 2018e 2019e

  29. Slide 29: Capital allocation

    CAPITAL ALLOCATION €Bn 2016-2020 trends Realized 2011-2015 WC CFO* Trend 2016-2020  Growth in cash from operations (CFO*)  Higher working capital (WC) WC R&D** (0.1) CAPEX  Lower capitalized R&D and CAPEX after 2016 R&D** CFO* CAPEX (6.6)  FCF conversion rate: FCF 10.2 • above 40% in 2016 Divide

  30. Slide 30: 2016-2020 ambition

    2016-2020 AMBITION  Revenue target above €21 billion in 2020 • Assuming average spot rate of USD 1.11 to the Euro in 2016 and 1.12 over 2017-2020  Recurring operating margin trending above 15% in 2020 • Including benefits of medium-term FX hedging policy  EBIT to Free Cash Flow conversion averagi

  31. Slide 31: Q&A

    Q&A BoAML | March 15, 2016 31 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 authorization of Safran.

  32. Slide 32: Safe harbor statement

    SAFE HARBOR STATEMENT  These documents contain forward-looking statements. All statements other than statements of historical fact in this presentation, including, without limitation, those regarding our financial position, business strategy, management plans and objectives for future operations, a

  33. Slide 33: Definitions

    DEFINITIONS All figures in this presentation represent Adjusted data Safran’s consolidated income statement has been adjusted for the impact of:  Purchase price allocations with respect to business combinations. Since 2005, this restatement concerns the amortization charged against intangible asset

  34. Slide 34: BoAML | March 15, 2016

    BoAML | March 15, 2016 34 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 authorization of Safran.

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