Safran Sa · EURONEXT:SAF
Safran Sa — FY2005 Earnings Presentation
54 slides from Safran Sa's earnings presentation, Mar 1, 2006
Slide 1: 2005 Results: SAFRAN, an international technology leader
2005 RESULTS March 1, 2006 SAFRAN an international technology leader 2005 annual results review 0 Analysts 0 Review
Slide 2: Attention
ATTENTION All of the following data is expressed as follows: • using IAS/IFRS standards • as adjusted pro-forma figures to enable comparing the finances of SAFRAN in 2004 and 2005, the merger of Snecma and Sagem is presumed to have taken place on January 1, 2004. The significant changes in scope of
Slide 3: SAFRAN Group
SAFRAN GROUP 2005 annual results review 2
Slide 4: An international technology leader
AN INTERNATIONAL TECHNOLOGY LEADER 2005 sales: 10.58 billion euros +4.7% over 2004 Orders: 12.6 billion euros +12% over 2004 More than 58,000 employees, including 18,000 outside France, in more than 30 countries around the world 2005 annual results review 3
Slide 5: 2005 Sales: 10.58 billion euros
2005 SALES: 10.58 billion euros BY BRANCH BY REGION Aerospace Propulsion 43% Rest of the World 8% Europe* 64% Asia 7% Aircraft Equipment 24% North America 21% Communications 22% Defense & Security 11% CIVIL/MILITARY SHARES Military 20% Civil 80% * Most erexported by prime contractor customers 2005 a
Slide 6: Human resources data
HUMAN RESOURCES DATA Workforce trends and distribution • After acquisitions and divestments: 58,060 employees at year-end 2005* Asia - Oceania 5% 4% Africa Americas 12% 69% France Europe (excl. France) 10% 12 % 69 % Workforce stability • 2,600 people hired, including about 1,400 management staff, of
Slide 7: Research and development
RESEARCH AND DEVELOPMENT Research and Development expenditures of 1.4 billion euros, including about 60% self-financed 20% of Group’s workforce 12 % Extensive scientific partnerships with: • Laboratories and universities from around the word • Public research in France (Inca, Maya, Iroqua initiative
Slide 8: SAFRAN's shareholding structure at Dec. 31, 2005
SAFRAN’S SHAREHOLDING STRUCTURE AT DEC. 31, 2005 Treasury shares 1.9% Areva 7.4% Employees 19.2% Public 40.7% State 30.8% 2005 annual results review 7
Slide 9: Business data
BUSINESS DATA 2005 annual results review 8
Slide 10: Growth in business volume
GROWTH IN BUSINESS VOLUME 2004 2005 Change Aircraft • CFM56 engines (production) 728 800 + 10 % • Turbomeca engines (production) 788 864 + 10 % of which helicopter turbines (production) 708 786 + 11 % • Landing gear sets (deliveries) 802 949 + 18 % • Power transmissions (deliveries) 1,030 1,304 + 27
Slide 11: Growth in business volume
GROWTH IN BUSINESS VOLUME 2004 2005 Change Communications • Mobile phones (excluding modules) 14,920,000 17,450,000 + 17 % • Set-top boxes (cable, DTTV, etc.) 750,000 1,520,000 + 103 % • Broadband terminals 3,200,000 4,060,000 + 27 % (residential gateways, ADSL modems) • Printing terminals 980,000 1
Slide 12: Aerospace Propulsion
AEROSPACE PROPULSION SALES Helicopters 16% Sales Space & • €4,493 million ballistic missiles Orders 12% • €5,723 million Civil aircraft Order book at Dec. 31, 2005 Military 58% aircraft • €12,400 million 14% Employees at Dec. 31, 2005 • 21,400 Original equipment & misc. Services 56% 44% 2005 annual
Slide 13: Aerospace Propulsion highlights
AEROSPACE PROPULSION HIGHLIGHTS Commercial aircraft engines • All-time record: 1,640 CFM56 engines ordered in 2005 CFM56 • 10% increase in production: 800 CFM56s in 2005 • Start of LEAP56 R&T program in conjunction with GE to pave the way for the successor to the CFM56 • First ground test of core fo
Slide 14: Aerospace Propulsion highlights
AEROSPACE PROPULSION HIGHLIGHTS Helicopter engines • Very strong orders: 1,251 Turbomeca engines Ardiden® • 11% increase in production (786 turbine engines) • First ground test of the Ardiden engine for 5-ton class helicopters • Strong support business TP400 Military aircraft engines • First ground
Slide 15: Aircraft Equipment
AIRCRAFT EQUIPMENT SALES Other Sales equipment 9% Aircraft • €2,510 million equipment 20% Orders • €3,000 million Engine Order book at Dec. 31, 2005 equipment, ncalles & thrust • €3,800 million Landing gear 44% reversers 27% Employees at Dec. 31, 2005 • 18,800 Original equipment & Services misc. 78%
Slide 16: Aircraft Equipment highlights
AIRCRAFT EQUIPMENT HIGHLIGHTS Aircraft engine nacelles • Good performance of Aircelle nacelles during flight tests of the Trent 900-powered Airbus A380 (17 delivered) A380 • First delivery of nacelles for the A380/GP7200 in December 2005 A350 Landing gear main landing gear • Messier-Dowty chosen by
Slide 17: Aircraft Equipment highlights
AIRCRAFT EQUIPMENT HIGHLIGHTS Electrical wiring • Labinal chosen to supply wiring for the A400M (nose) and for the Falcon 7X A400M • All Raytheon wiring production successfully transferred to Labinal • Labinal to produce all wiring for the integrated equipment in the “Félin” future soldier program o
Slide 18: Aircraft Equipment highlights
AIRCRAFT EQUIPMENT HIGHLIGHTS Messier-Bugatti – wheels and carbon brakes • Mainline jet fleet in service: 2,495 aircraft, or 38% of total fleet fitted with carbon brakes • Airbus A320 family - Messier-Bugatti chosen in 2005 to outfit more than 500 aircraft - Messier-Bugatti is now a supplier to 81%
Slide 19: Defense Security
DEFENSE SECURITY SALES Sales • €1,232 million Navigation and aircraft systems Orders Security 28% 39% • €1,300 million Order book at Dec. 31, 2005 • €1,500 million Optronics and air-land Employees at Dec. 31, 2005 systems • 9,000 33% 2005 annual results review 18
Slide 20: Defense Security highlights
DEFENSE SECURITY HIGHLIGHTS Optronics and air-land systems • Naval optronics: Australian navy orders 17 third-generation Periscope infrared missile tracking systems • Sagem Défense Sécurité chosen to provide periscopes and navigation equipment for Indian Scorpène submarines • For the BOA (Bulle Opér
Slide 21: Defense Security highlights
DEFENSE SECURITY HIGHLIGHTS Navigation and aircraft systems • Sagem Défense Sécurité selected to supply inertial navigation AASM systems for the Airbus A400M • Morocco chooses Astrac (50/50 joint venture of Sagem Défense Sécurité and Thales) to modernize 27 Mirage F1s. • AASM missile qualified at CE
Slide 22: Defense Security highlights
DEFENSE SECURITY HIGHLIGHTS Biometrics • Supply of biometric identification systems to Brazil, Colombia, Congo, Jamaica, Venezuela, Mexico and Croatia (January 2006) • Sagem Défense Sécurité selected for the UK police’s new Biometrics « Ident1 » system • Sagem Défense Sécurité systems integrator on
Slide 23: Sagem Défense Sécurité acquires ORGA Kartensysteme
DEFENSE SECURITY Sagem Défense Sécurité acquires HIGHLIGHTS ORGA Kartensysteme ORGA Sagem Défense Sécurité 2005 sales €180 M Workforce 1,500 Highly complementary in terms of geographic coverage and industrial capacity Combination of areas of excellence: ORGA for sim cards Sagem Défense Sécurité
Slide 24: Communications
COMMUNICATIONS SALES Sales • €2,342 million * Broadband Mobile 53% 47% Orders • €2,600 million Workforce at Dec. 31, 2005 • 8,300 * Included €227 M from Cables business 2005 annual results review 23
Slide 25: Communications highlights
COMMUNICATIONS FAITS MARQUANTS Mobile phones • Nearly 17.5 million mobile phones sold in 2005 (+17%) • Trend towards higher-end models throughout 2005, with a number of new products including the my301X (slim-line), myC2-3, myC3-2 and myC5-2. • Startup of production in Brazil (Sagem Comunicações) my
Slide 26: Strengthened partnership with Bird
COMMUNICATIONS Strengthened partnership with Bird (kicked off in 1999, continued in 2002 with 50/50 joint venture for production of mobile phones) • MoU with Bird signed in July 2005: Development of joint In November 2005, creation of Integrated sales and purchasing an R&D joint venture with marketi
Slide 27: Communications highlights
COMMUNICATIONS HIGHLIGHTS Broadband residential gateways • Over 4 million products delivered in 2005 (2 million residential gateways and 2 million modems) Cbox Î Sagem Communication becomes No. 2 in Europe in 2005 Set-top boxes • More than 1.5 million set-top boxes delivered • Sagem Communication be
Slide 28: Communications highlights
COMMUNICATIONS HIGHLIGHTS Digital photo printers and fax machines • One million terminals delivered, including 40,000 digital photo printers • Creation of a Sagem/Photar joint venture (70/ 30) to produce and market fax machines in China Printing terminal Network equipment • Establishment of a 50/50
Slide 29: Financial data
FINANCIAL DATA 2005 annual results review 28
Slide 30: SAFRAN financial statements at Dec. 31, 2005
SAFRAN FINANCIAL STATEMENTS AT DEC. 31, 2005 Creation of the SAFRAN Group and impact on accounting: • The Snecma/Sagem merger took effect on May 11 after the successful public share exchange/purchase offer on March 17, 2005 • Snecma accounts were consolidated within Sagem as of April 1, 2005 • The c
Slide 31: SAFRAN financial statements at Dec. 31, 2005
SAFRAN FINANCIAL STATEMENTS AT DEC. 31, 2005 To effectively monitor the Group’s finances: Audited pro-forma consolidated statements are drawn up for 2004 and 2005, with the merger operation considered to have been carried out on January 1, 2004 These audited pro-forma consolidated statements are sho
Slide 32: Key figures
KEY FIGURES* (millions of euros) 2004 2005 Var Sales 10,098 10,577 + 4.7%(1) Operating income 699 762 + 9.0% as % of sales 6.9% 7.2% Net income, Group share 407 501 + 23.1% (1) +6.2% with a constant dollar * Adjusted pro-forma data 2005 annual results review 31
Slide 33: Comparison of operating income 2004-2005
COMPARISON OF OPERATING INCOME* 2004 – 2005 ((millions of euros) +180 +762 699 (9) (149) +41 2004 R&D Dollar Volumes Product mix 2005 Operating Productivity Operating income and misc. income * Adjusted pro-forma data 2005 annual results review 32
Slide 34: Research & Development
RESEARCH & DEVELOPMENT* (millions of euros) 2004 2005 Self-financed R&D 724 823 as % of sales 7.2% 7.8% operating expenses 537 546 capitalized 187 277 * Adjusted pro-forma data 2005 annual results review 33
Slide 35: Financial guarantees
FINANCIAL GUARANTEES (millions of US$) 2004 2005 Var Total commitments 767 610 (157) Estimated value of guarantees 459 330 (129) Net risk on these commitments 308 280 (28) Provisions 244 241 (3) 2005 annual results review 34
Slide 36: Exchange risk exposure
EXCHANGE RISK EXPOSURE One-third of USD revenues naturally covered by USD purchases Group exposure to USD risk in 2005: • US$3,300 million hedged at €1 = $1.05 Hedging portfolio at Dec. 31, 2005: • US$6,113 million (versus US$5,419 million at Dec. 31, 2004) • At average exchange rate of €1 = $1.10 2
Slide 37: Statement of income
STATEMENT OF INCOME* (millions of euros) 2004(1) 2005 Change Sales 10,098 10,577 + 4.7% Operating income 699 762 + 9.0% Financial income (92) (87) Taxes (188) (170) Minority interests (14) (7) Net income - Group share 407 501 + 23.1% Net profit per share (€) 0.99 1.22 (1) Excluding application of IA
Slide 38: Aerospace Propulsion
AEROSPACE PROPULSION* % 2004 2005 Change (millions of euros) 2005/ 2004 H1 H2 Total H1 H2 Total Sales 2,083 2,232 4,315 2,070 2,423 4,493 + 4.1% Operating income 155 237 392 193 261 454 + 15.8% % of sales 7.4 % 10.6% 9.1% 9.3% 10.8% 10.1% Self-financed R&D 109 178 287 180 146 326 +14% Of which capit
Slide 39: Aircraft Equipment
AIRCRAFT EQUIPMENT* % 2004 2005 Change (millions of euros) 2005/ 2004 H1 H2 Total H1 H2 Total Sales 1,086 1,133 2,219 1,187 1,323 2,510 + 13.1% Operating income 93 72 165 113 96 209 + 26.7% % of sales 8.6 % 6.4% 7.4% 9.5% 7.3% 8.3% Self-financed R&D 119 82 201 126 96 222 + 10% Of which capitalized (
Slide 40: Defense Security
DEFENSE SECURITY* % 2004 2005 Change (millions of euros) 2005/ 2004 H1 H2 Total H1 H2 Total Sales 527 632 1 159 575 657 1 232 + 6.3% Operating income 46 57 103 38 71 109 + 5.8% % of sales 8.7% 9.0% 8.9% 6.6% 10.8% 8.8% Self-financed R&D 36 40 76 39 44 83 + 9% Of which capitalized (net) 10 10 20 10 1
Slide 41: Communications
COMMUNICATIONS* % 2004 2005 Change (millions of euros) 2005/ 2004 H1 H2 Total H1 H2 Total Sales 1,134 1,271 2,405 1,111 1,231 2,342 (2.6%) Operating income 61 52 113 (13) 13 0 % of sales 5.4 % 4.1% 4.7% (1.2%) 1.1% 0% Self-financed R&D 85 75 160 91 102 193 + 21% Of which capitalized (net) 4 (2) 2 22
Slide 42: Free cash flow from operations
FREE CASH FLOW FROM OPERATIONS* (millions of euros) 2005 Cash flow + 1 097 Impact of change in gross working fund requirement + 229 Capital investments (308) Investments in intangible assets (391) Free cash flow from operations + 627 * Adjusted pro-forma data 2005 annual results review 41
Slide 43: Change in cash position
CHANGE IN CASH POSITION (millions of euros) Cap. and Change intangible WCR investments + 229 Cash flow ( 699) + 1 097 Fin. invest. IFRS non-cash & misc. Dividends adjustments Acquisition debt +9 (95) (103) Cash position (1,250) at 1/1/05 Cash position + 339 at 12/31/05 (473) 2005 annual results revi
Slide 44: Balance sheet at Dec. 31, 2005
BALANCE SHEET AT DEC. 31, 2005 (millions of euros and including IFRS 3) ACTIF PASSIF Goodwill 1 452 Shareholders’ equity 4 736 Fixed assets 4 885 Provisions 1 735 Other non-current assets 572 Debts subject to specific conditions 426 Fair value of financial instruments 452 Interest-bearing liabilitie
Slide 45: Gearing
GEARING Net financial debt €473 million Shareholders’ equity €4,736 million Gearing 10 % 2005 annual results review 44
Slide 46: Dividend
DIVIDEND Acting on a proposal by the Executive Board, the Supervisory Board has approved the payment of a dividend of €0.36 per share for the financial year 2005, an increase of 63.6% over the dividend paid in 2004 Pending approval by the Annual General Meeting of Shareholders, this dividend will be
Slide 47: Outlook
OUTLOOK Growth in sales Increase in operating income Increase in net income 2005 annual results review 46
Slide 48: Appendices
APPENDICES 2005 annual results review 47
Slide 49: The merger operation
THE MERGER OPERATION Review of the SAFRAN creation process 4Sagem launches public share exchange/purchase offer for Snecma On March 17, 2005, Sagem held 83% of Snecma: • Exchange offer (issue of 188M Sagem shares at €16.45) : €3,089 M • Purchase offer (debt) €1,250 M 4Sagem SA’s operations spun off
Slide 50: Allocation of the acquisition cost
ALLOCATION OF THE ACQUISITION COST Acquisition cost: €5,139 M • Cancellation of Snecma shareholders’ equity (€2,026 M) Goodwill €3,113 M Asset/Liability revalution: €1,755 M including: • Programs/brands €2,260 M • Inventories €444 M • Deferred taxes (€946 M) Residual goodwill €1,358 M 2005 annual re
Slide 51: Transition from reported to adjusted pro-forma financial statements
TRANSITION FROM REPORTED TO ADJUSTED PRO-FORMA FINANCIAL STATEMENTS Pro-forma restated ADJUS REPOR Hedged. PRO Amort. TED TED FORMA Incorp. PRO Q1 Exchan Derivati Inventori Other FORMA ge ves es SALES 8,692 + 1 565 + 320 10,577 10,577 EBIT (308) +79 + 320 + 444 + 55 590 + 172 762 FINANCIAL (166) (2)
Slide 52: SAFRAN's general savings plan
SAFRAN’S GENERAL SAVINGS PLAN • Savings plan launched in early 2004 by Snecma, prior to merger with Sagem: €500 million by 2008 • Synergies from Snecma-Sagem merger (see January 2005 memo): €163 to €205 million by 2008 Ä SAVINGS PLAN AS DECIDED: €700 million by 2008 Within the scope of the gener
Slide 53: SAFRAN's savings identified
SAFRAN’S SAVINGS IDENTIFIED Breakdown savings indentified: €638 M Group purchasing Industrial and sourcing rationalization €161 M €245 M Developpement €101 M business & partenariats Support functions €131 M & structural synergies 2005 annual results review 52
Slide 54: Financial progress in synergies from Snecma-Sagem merger
FINANCIAL PROGRESS IN SYNERGIES FROM SNECMA-SAGEM MERGER Initial objective for locked-in gains as of year-end 2005 (see January 2005 memo) €67 to €81 million Actual locked-in gains as of year-end 2005 €73 million 2005 annual results review 53