Safran Sa · EURONEXT:SAF
Safran Sa — Investor Day (November 2018)
124 slides from Safran Sa's investor day presentation, Nov 29, 2018
Slide 1: Building the Aerospace of Tomorrow
2018 BUILDING THE AEROSPACE OF TOMORROW 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 authorization of Safran
Slide 2: Agenda
C2 - Restricted Agenda 2018 Welcome Chairman’s opening remarks Perspectives and strategy Financial Framework Q&A CFM56 / LEAP transition and Aftermarket Q&A Break Zodiac integration and Aircraft Interiors recovery Innovation Q&A Conclusion 2 Safran - Capital Markets Day 2018 / November 29, 2018 This
Slide 3: Today's speakers
C2 - Restricted Today’s speakers 2018 Chairman’s Perspectives Financial CFM56 / LEAP transition and Aftermarket opening remarks and strategy framework Ross McINNES, Philippe PETITCOLIN, Bernard DELPIT, Olivier ANDRIÈS, Safran François BASTIN, François PLANAUD, SAE, Chairman of the Board CEO CFO Airc
Slide 4: Chairman's Opening Remarks
C2 - Restricted CHAIRMAN’S OPENING REMARKS Ross McINNES, Chairman of the Board 4 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 authorizatio
Slide 5: Perspectives and Strategy
C2 - Restricted PERSPECTIVES AND STRATEGY Philippe PETITCOLIN, CEO 5 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 authorization of Safran
Slide 6: CMD'16 ambitions delivered and exceeded
C2 - Restricted CMD’16 ambitions delivered and exceeded 2018 Three ambitions Three achievements ● Successful disposal of Security and Identity 1 Focus on Aerospace and Defense businesses ● Unparalleled LEAP ramp-up Reinforce our footprint in Aerospace ● Acquisition of Zodiac Aerospace 2 Equipment ●
Slide 7: Our industry: very positive perspectives, changing industrial landscape
C2 - Restricted 1 OUR INDUSTRY: VERY POSITIVE PERSPECTIVES, CHANGING INDUSTRIAL LANDSCAPE 7 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 a
Slide 8: Positive industry trends
C2 - Restricted Positive industry trends 2018 Commercial outlook Military outlook Doubling of air traffic in the next 20 years Increase in military spending (2% GDP NATO spending Pressure on capacity: load factors peaking and strong targets) profits for airlines New programs and technological transf
Slide 9: Planned aircraft deliveries better than anticipated
C2 - Restricted In commercial aviation, planned aircraft deliveries better than anticipated 2018 20-year 20-year 20-year Very positive outlook 20-year annual annual RPK annual new aircraft for commercial economic traffic global fleet deliveries* aviation over the growth* growth* growth* 20 coming ye
Slide 10: A changing industrial landscape
C2 - Restricted A changing industrial landscape 2018 Rapid changes Safran’s responses Technological OEM Define the next upheaval consolidation OEM partner of choice Aerospace state Towards electrical and of the art plane repositioning ● Continued cost ● R&D competitiveness ● Disruptive (productivity
Slide 11: Safran has the assets for success
C2 - Restricted 2 SAFRAN HAS THE ASSETS FOR SUCCESS 11 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 authorization of Safran
Slide 12: Well-positioned for success
C2 - Restricted Well-positioned for success: winning products, winning technologies… 2018 WE HAVE THE KNOW-HOW AND OPERATIONAL EXCELLENCE WE HAVE A BALANCED AND WINNING PORTFOLIO WE HAVE A CLEAR ROADMAP FOR THE NEXT 15 YEARS New ambitions ahead: leading the industry and preparing the next decades
Slide 13: ...and talented people
C2 - Restricted …and talented people 2018 Geographic split of Employees (%, 2018) An international Group of ~90,000 in 2018 ● Reinforced footprint in North America with Zodiac Aerospace Rest of Europe ● Upcoming capacities increase in Low Cost Countries France 12% USA + Canada China (LCC) 47% 2% 16%
Slide 14: Clear ambition for each business
C2 - Restricted 3 CLEAR AMBITION FOR EACH BUSINESS: PREPARING THE NEXT DECADES OF AEROSPACE AND DEFENSE INDUSTRY 14 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 wit
Slide 15: Propulsion – Our ambitions for the next 15 years
C2 - Restricted Propulsion – Our ambitions for the next 15 years 2018 A FULL-FLEDGED ENGINE MANUFACTURER PREPARING THE FUTURE OF PROPULSION BY DEFINING THE TECHNOLOGIES OF TOMORROW MANAGING A LARGE INSTALLED BASE OF CIVIL ENGINES, UPSIDE FOR AFTERMARKET 15 Safran - Capital Markets Day 2018 / Novembe
Slide 16: Propulsion – Full spectrum of propulsion technologies
C2 - Restricted Propulsion – Supplying the full spectrum of propulsion technologies 2018 Narrowbodies: core through our remarkable CFM JV* Widebodies: through risk and revenue sharing partnerships** Addressing other market segments: bizjet, regional and military engines Helicopter engines: #1 WW * 5
Slide 17: Propulsion – LEAP ramp-up, CFM56 lifespan
C2 - Restricted Propulsion – LEAP, the most challenging ramp-up in the Aerospace 2018 history; CFM56, a remarkable lifespan CFM engine deliveries p.a. LEAP: an unparalleled and ground breaking ramp-up 2,500 2500 LEAP 2,000 2000 CFM 56 CFM56: a large installed base ● Remarkable longevity of CFM56: ~5
Slide 18: Propulsion – Other customer segments
C2 - Restricted Propulsion – Other customer segments: growth to come from engine 2018 renewals Bizjets Military aircraft Helicopters New engines Aneto Arrano 2,050/3,200 1,100/1,400 Arrius 2 Ardiden 500/700 1,500/2,050 shp 500 1,000 1,500 2,000 3,000 Arriel 1&2 750/1,100 Makila 1&2 1,800/2,200 Prior
Slide 19: Propulsion – Preparing future technologies
C2 - Restricted Propulsion - Preparing future technologies 2018 New forms of propulsion to come ● Environmental constraints ● New mobility needs: urban and regional mobility ● Full electrical propulsion: not expected before 2050 for large commercial aircraft Hybridation of the propulsion chain: an e
Slide 20: Aerospace Equipment – Our ambitions
C2 - Restricted Aerospace Equipment – Our ambitions for the next 15 years 2018 Safran in 2018: #2 WW Aerospace Equipment* supplier Our ambition: becoming #1 WW Very significant positions in almost Increasing our competitiveness all market segments and being innovative A world-class business e.g. : O
Slide 21: Zodiac Aerosystems reinforces Electronics & Defense
C2 - Restricted Equipment – Zodiac Aerosystems reinforces our Electronics & Defense / 2018 Electrical & Power activities Aerosystems brings: ● Complementary and additional products Safran & services in line with Safran DNA Zodiac Electronics & Aerosystems Defense Safran Electronics & Defense: ● Cent
Slide 22: Equipment – Our assets in a changing landscape
C2 - Restricted Equipment - Our assets in a changing landscape 2018 Our assets Two illustrations of our agility Nacelles ● Continuation of the sole source 1. Innovative contract with Airbus to supply nacelles for the Leap-1A equipped excellence A320neo (design, production, integration and support) ●
Slide 23: Aircraft Interiors – Our ambitions
C2 - Restricted Aircraft Interiors – Our ambitions 2018 A new business for Safran, with exciting challenges: ● Maintain design savoir-faire and quickly restore operational excellence ● Reinforce the proximity with the airlines ● Become a leader of the connected cabin ● Improve the user experience (p
Slide 24: Aircraft Interiors – Upcoming growth opportunities
C2 - Restricted Aircraft Interiors – Upcoming growth opportunities 2018 Strong product customization and increased segmentation ● Cabin is the main differentiator for airlines ● Passengers looking for a modern IFE (simple and reliable) and for connectivity Dynamic retrofit market (~5% of growth p.a.
Slide 25: A clear road map
C2 - Restricted A clear road map 2018 Complete the LEAP success story with best-in-class OE and aftermarket, in cooperation with our partner GE Aviation Successfully integrate Zodiac Aerospace and deliver planned synergies Invest in technologies to bolster our key-leading position as a full-fl
Slide 26: Financial Framework
C2 - Restricted FINANCIAL FRAMEWORK Bernard DELPIT, CFO 26 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 authorization of Safran
Slide 27: Key messages
C2 - Restricted Key messages 2018 Sound financial policy (hedging, accounting, funding) Strong organic growth across all businesses Improved performance on profitability and cash Disciplined capital allocation and focus on shareholder returns 27 Safran - Capital Markets Day 2018 / November 2
Slide 28: Finance at the service of excellence
C2 - Restricted 1 FINANCE AT THE SERVICE OF EXCELLENCE - Hedging - Accounting - Funding 28 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 au
Slide 29: Hedging policy framework
C2 - Restricted Hedging policy framework 2018 Safran implements a hedging strategy to reduce uncertainty in a volatile FX environment ● Safran hedges 4 currencies: USD, GBP, CAD and MXN Safran implements a comprehensive hedging policy ● Strict hedging policy, regularly reviewed and approved by the B
Slide 30: USD portfolio resilient to market movements
C2 - Restricted A USD portfolio resilient to potential market movements 2018 Safran uses leveraged options with barrier levels ● The USD portfolio includes an average of 300 structured instruments, each with different barrier levels ● The barriers at various levels provide resilience to FX movements
Slide 31: A USD 29.2bn portfolio
C2 - Restricted A USD 29.2bn portfolio (mid-November 2018) 2018 Average annual exposure estimated at $8.8bn going forward 2018 Exposure raised to $8.0bn and fully hedged (As of reflecting the growth of USD-exposed businesses Nov. 16, 2018, in $bn) and former Zodiac Aerospace activities 2019 $7.5bn a
Slide 32: IFRS15
C2 - Restricted IFRS15 2018 Main changes of IFRS15 Estimated impact of IFRS15 for 2018-2022 Guarantees deducted from Revenues CFM56 / IAS18 Gross Margin breakeven of LEAP: 2020 LEAP Change in the timing of Revenue recognition as different transition prices are allocated to installed engines and spar
Slide 33: New changes to come with IFRS 16
C2 - Restricted New changes to come with IFRS 16 2018 IFRS 16 (leases) will be applied by Safran starting January 1st, 2019. 2018 will not be restated. The impact of change of accounting method, if any, will impact 2019 opening balance sheet IFRS 16 impacts for Safran ● Mainly affecting real estate,
Slide 34: Balanced and diversified debt maturity schedule
C2 - Restricted Safran maintains balanced and diversified debt maturity schedule 2018 with active use of financing opportunities Active management of the balance sheet Debt maturity schedule (€M) with cash in-hand ● Safran has paid down €1.3bn of Zodiac 1,000 Aerospace debt, thus reducing interest 9
Slide 35: Financial Ambition
C2 - Restricted 2 FINANCIAL AMBITION - Growth - Margins - Cash generation - Capital allocation 35 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 wri
Slide 36: Growth: all businesses are growing
C2 - Restricted Growth 2018 Adjusted Revenue (€m) Civil Aftermarket Revenue CFM engines deliveries and Organic Growth (%) (Growth in $) Under discussion Zodiac Committed Aero. ~40% 9%* 2,000 ~10% High Organic single digit Safran Growth p.a. 7%* (%) Mid single digit Mid single digit** 2018e 2019e 202
Slide 37: The CFM56-LEAP transition
C2 - Restricted The CFM56-LEAP transition 2018 CFM56 / LEAP Original Equipment (OE) contribution Impact of IFRS15 on transition profile planned (CMD’16) CMD’18 (1) Under IAS18 2015 2016 2017 2018e 2019e 2020e+ 2015 2016 2017 2018e 2019e 2020e 2021e 2022e Post Under IFRS15 2022e Breakeven +2 years (2
Slide 38: CFM56 / LEAP transition: what's next?
C2 - Restricted CFM56 / LEAP transition: what’s next? 2018 Cumulative number of engine deliveries Illustrative impact of price and cost evolution CFM56 / LEAP OE contribution to Gross Margin 40,000 40000 CFM56 35,000 35000 30,000 30000 25,000 25000 20,000 20000 15,000 15000 LEAP 10,000 10000 5,000 5
Slide 39: 2018-2022 ambition for Propulsion margin
C2 - Restricted 2018-2022 ambition for Propulsion: Recurring Operating Margin 2018 trending above 20% Propulsion Recurring Operating Margin Assumptions 22% >20% Civil Aftermarket growth 20% 18% Completion of the CFM56 / LEAP transition 16% 17.7% 16.2% Narrowbody production rate as committed to airfr
Slide 40: Margin ambition for Equipment and Defense
C2 - Restricted 2018-2022 ambition: Recurring Operating Margin beyond 16% 2018 for Equipment and beyond 10% for Defense Equipment Recurring Operating Margin Defense Recurring Operating Margin 20% 12% 16% 10% >16% 7.1% >10% 12.6% 8% 12% 7.1% 11.8% 6% 8% 4% 4% IAS18 IFRS15 IAS18 IFRS15 2% 0% 0% 2010 2
Slide 41: Former Zodiac Aerospace: recovery confirmed
C2 - Restricted 2018-2022 ambition for former Zodiac Aerospace: recovery confirmed 2018 Zodiac Aerospace Recurring Operating Margin Zodiac Acquisition Business Plan targets (May, 2017) to be delivered in 2022: 20% ~15% including ● €200M cost synergies confirmed synergies booked ● >13% Margin in 2022
Slide 42: Group 16-18% margin by 2022
C2 - Restricted 2018-2022 ambition for the Group: a 16-18% margin by 2022 2018 Group Recurring Operating Margin Indicative profile of Group Gross Margin 20% 16%-18% OE CFM56 & LEAP 15.0% 15% Other OE 13.7% 10% Services (excl. Zodiac Aerospace Services) IAS18 IFRS15 5% 2018e 2019e 2020e 2021e 2022e 2
Slide 43: 2018-2022 strong cash flows from operations
C2 - Restricted 2018-2022 strong cash flows from operations 2018 EBITDA (€M) €Bn Cash from Change R&D FCF 6,000 6000 operations (CFO) in WC Capex 5,000 5000 +0.1 +~50% (7.5) 4,000 4000 12.3 4.9 3000 3,000 2013-2017 2018e-2022e (objectives) 2000 2,000 MAIN FCF TAILWINDS: ● Increase in profitability a
Slide 44: Focus on working capital
C2 - Restricted Focus on working capital 2018 Total advance payments (€bn) Inventories and WIP (€bn) RPFH cash contribution (€bn) (Projected balance sheet over the period) (Projected balance sheet over the period) (Projected balance sheet over the period) 2018e 2018e 2019e 2019e 2020e 2020e 2021e 20
Slide 45: Focus on R&D: new cycle ahead
C2 - Restricted Focus on R&D: new cycle ahead 2018 Total R&D Spending (in €M) From 2018, new cycle of R&D 2,000 2000 Excl. Zodiac Aerospace Forecast (incl. Zodiac Aerospace) spending: Total R&D effort* ● Assumption: NMA launched 1500 1,500 ● Catch up on Zodiac 1000 1,000 Self-funded R&D Increased se
Slide 46: Focus on Capex
C2 - Restricted Focus on Capex 2018 Total Capex spending (in €M) 1200 1,200 MRO network development for LEAP 1,000 1000 Accelerated development 800 of additive manufacturing 600 Catch up on Zodiac 400 200 Total Capex spending around 4% of sales over 2018-2022 0 2015 2016 2017 2018e 2019e 2020e 2021e
Slide 47: 2018-2022 Capital allocation policy
C2 - Restricted 2018-2022 Capital allocation policy 2018 FCF IMPROVED OVER 2018-2022 Priority Disciplined Deleveraging to shareholders M&A returns 47 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
Slide 48: Disciplined M&A policy
C2 - Restricted Disciplined M&A policy 2018 Selective bolt-on’s reinforcing Safran No major acquisition footprint Zodiac currently contemplated portfolio pruning e.g. Rockwell Collins’ in the coming years actuators, pilot controls and special products 48 Safran - Capital Markets Day 2018 / November
Slide 49: Strong investment grade profile with efficient balance sheet
C2 - Restricted Reaffirmed objective of strong investment grade profile 2018 with efficient balance sheet management Net financial debt/EBITDA of Safran vs. industry peers (2018e) - Adjusted 3.5x 2.6x 2.1x 1.3x 0.9x 0.9x 0.4x 0.4x 0.0x Peer 9 Peer 1 Peer 2 Peer 3 Peer 4 Peer 5 Safran Peer 6 Peer 7 P
Slide 50: Shareholder returns (1/2) – Best-in-class TSR
C2 - Restricted Shareholders returns (1/2) – Best-in-class TSR over past 10 years 2018 Safran dividend (2008-2017) Safran share performance vs. CAC 40 index (2008-2018) 800 1,8 As of November 23, 2018 1.6 Dividend 700 1.52 1,6 by share (€) 740% 1.38 1,4 600 dividend Interim 1.2 640% SAFRAN + 685.9%
Slide 51: Shareholder returns (2/2) – Increased cash returns
C2 - Restricted Shareholders returns (2/2) – Increased cash returns over 2018-2022 2018 More dividends driven by higher results €Bn Over 50% of the €2.3bn buyback program already executed, FCF Buybacks Dividends with €1.1bn to go in the next 12/18 months (2.3) ● €522M through 2 buyback tranches anno
Slide 52: Financial wrap-up – Medium term ambition
C2 - Restricted 2018-2022 Financial wrap-up – Medium term ambition 2018 Continued organic Growth ● Mid-single digit Revenue Growth over 2019-2022 (assuming average spot rate of USD 1.25 to the Euro over 2019-2022) ● Civil Aftermarket growing on average at high-single digit Best-in-class profitabilit
Slide 53: 1st Q&A session
C2 - Restricted 1st Q&A session STRATEGY AND FINANCIAL FRAMEWORK Philippe PETITCOLIN, CEO Bernard DELPIT, CFO 53 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 withou
Slide 54: 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 55: 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 56: 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 57: 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 58: 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 59: LEAP in service: 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 60: ...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 61: 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 62: 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 63: 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 64: 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 65: 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 66: 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 67: Closed door machining: Le Creusot
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 68: 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 69: CFM56 / LEAP Transition: 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 70: 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 71: 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 72: 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 73: 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 74: 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 75: 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 76: CFM56: 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 77: 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 78: LEAP: moving to Services with different 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 79: 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 80: 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 81: LEAP: Rate Per Flight Hour 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 82: 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 83: 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 84: 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
Slide 85: 2nd Q&A session
C2 - Restricted 2nd Q&A session CFM56 / LEAP TRANSITION AND AFTERMARKET Olivier ANDRIÈS, SAE CEO François BASTIN, SAE Commercial Engines François PLANAUD, SAE Services & MRO 85 Safran - Capital Markets Day 2018 / November 29, 2018 This document and the information therein are the property of Safran.
Slide 86: Zodiac Integration and Aircraft Interiors Recovery
C2 - Restricted ZODIAC INTEGRATION AND AIRCRAFT INTERIORS RECOVERY Hélène MOREAU-LEROY, Zodiac Aerospace Integration Vincent MASCRÉ, Zodiac Aerospace CEO & Zodiac Aerospace Seats CEO Norman JORDAN, Zodiac Aerospace Cabin CEO 86 Safran - Capital Markets Day 2018 / November 29, 2018 This document and
Slide 87: Zodiac Aerospace Integration
C2 - Restricted 1 ZODIAC AEROSPACE INTEGRATION Hélène MOREAU-LEROY, Zodiac Aerospace Integration 87 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 w
Slide 88: Synergies: priority levers of integration
C2 - Restricted 3 priority levers of integration and value creation 2018 Reducing overheads and streamlining organizations to improve INTEGRATION PROJECT ORGANIZATION IN PLACE AND DELIVERING operational responsiveness Roadmaps defined Implementing Group in all workstreams SYNERGIES FUNCTIONAL oper
Slide 89: Organization: streamlining
C2 - Restricted Organization: streamlining 2018 Fully integrate Zodiac Aerospace into Safran for a lean governance and efficient operations ● Central corporate functions regrouped – generating €15M synergies year on year 2018 ● Direct representation of Seats, Cabin and Aerosystems on Safran Executiv
Slide 90: Functional convergence and operational performance
C2 - Restricted Functional convergence and operational performance 2018 Central Functional processes, reporting and compliance in place for control functions and cost savings alignment ● Program / project management Safran operational standards being deployed ● Manufacturing Operational ● Supply cha
Slide 91: Operational recovery on-track – Seats France
C2 - Restricted Operational recovery on-track – case study of Seats France Gradually deploying the full scope of integration actions to support on-site operational recovery 2018 General context of site support Focus on manufacturing workshop #1 Safran takeover (Feb-18) Operational Issue addressed Re
Slide 92: Synergies
C2 - Restricted Synergies 2018 Initial plan confirmed Synergies ● Annual €200M pre-tax run rate cost synergies will be fully delivered by 2022 250 Additional objective ● Strong monitoring in place and clear ownership across Safran 200 by year 5 ● One-off synergies implementation costs in line with p
Slide 93: Investing to strengthen Zodiac Aerospace
C2 - Restricted Investing to strengthen Zodiac Aerospace 2018 Focusing on core areas to ensure strong pillars of future growth: ● Overall information systems upgrades with dedicated projects IT/IS ● Investments > To upgrade factory standards Production > To meet Safran security standards (including
Slide 94: Aircraft Interiors
C2 - Restricted 2 AIRCRAFT INTERIORS Vincent MASCRÉ, Zodiac Aerospace CEO & Zodiac Aerospace Seats CEO Norman JORDAN, Zodiac Aerospace Cabin CEO 94 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 c
Slide 95: Aircraft Interiors: broad portfolio of integrated solutions
C2 - Restricted Aircraft Interiors: a broad portfolio of integrated solutions and equipment 2018 OVERHEAD LAVATORIES GALLEYS BINS & CABIN & CATERING LININGS EQUIPMENT (Ovens, Coffee Makers, Trolleys etc.) SEATS INFLIGHT VIP CABIN (& crew seats) ENTERTAINMENT Ensure safety and comfort (even wellnes
Slide 96: A world leader in Aircraft Interiors
C2 - Restricted A world leader in Aircraft Interiors 2018 #1 in Galleys #2 in Seats Largest and easiest In-house composite and Trolleys closing ECOS bins manufacturer World’s first to certify reinforced cockpit door Breakthrough Innovative space-saving in seat-centric IFE: galley and lavatory RAVE s
Slide 97: Aircraft Interiors are attractive for Safran
C2 - Restricted Aircraft Interiors are attractive for Safran 2018 $12.8 Billion in 2018 worldwide market (1) Growing market: 2018-2022 forecasted CAGR: +3.2% CABIN, +4.6% SEATS, +7% IFE (1) Regular business opportunities mitigating cyclicality of aircraft projects: ● Short product life cycles (Devel
Slide 98: Aircraft Interiors industry is changing
C2 - Restricted Aircraft Interiors industry is changing 2018 Industry changes Safran’s know-how ● Design ● Innovation on architecture and technology ● Customization and product segmentation Airlines ● Bespoke solutions offers for “leaders” ● Modular products lines ● Connected cabin ● Equipment life
Slide 99: Innovation & design with airline customers
C2 - Restricted Innovation & design, to thrive together with our airline customers 2018 Passenger experience goes beyond pure functional experience to propose an emotional experience 200 employees working on ● Advanced concepts ● Style & Perceived quality ● Research & Technology ● More than 1,200 pa
Slide 100: Seats: Today
C2 - Restricted Seats: Today 2018 Products & Market Footprint & Processes ● N°2 worldwide with 30% market share ● 3 product-oriented Business Units + 3 centers of excellence for key sub-assemblies (France, UK, USA) ● Return to offerability ● 2 competitive factories for metallic & composite component
Slide 101: Seats: Our ambition
C2 - Restricted Seats: Our ambition 2018 Products & Market Footprint & Processes ● Re-conquer customer base on all segments after ● Set-up robust design and supply chain processes non-offerability period: to restore excellence in execution: > Back to 35% market share > On-time delivery 100% ● Offer
Slide 102: Cabin: Today
C2 - Restricted Cabin: Today 2018 Products & Market Footprint & Processes ● N°1 worldwide with 22% market share(1), followed ● Composed of 8 acquisitions made between 2005-2014 closely by Rockwell-Collins and Diehl Aerosystems ● 30 sites and 13,900 employees ● Customer base split 50/50 between OEMs
Slide 103: Cabin: Our ambition
C2 - Restricted Cabin: Our ambition 2018 Products & Market Footprint & Processes ● Enhance N°1 market position ● Full deployment of Lean Sigma “One Safran” ● Regain the trust of our customers by improving ● Product centers of excellence oriented around 4 our operational performance, both quality and
Slide 104: In-Flight Entertainment
C2 - Restricted In-Flight Entertainment 2018 Today Our ambition Market products: ● Double sales in 5 years, driven by technology lead ● N° 3 worldwide (5% market share) ● From IFE platform, expand to Global connectivity business ● RAVE product technology leader > Fully seat-centric, thin, light, hig
Slide 105: Our vision for Safran Interiors
C2 - Restricted Our vision for Safran Interiors: customized global excellence 2018 Restore full confidence from our customers through: ● Quality & performance of our products and services > Innovate through technology and architecture, while leveraging our « well designed and passenger friendly » pr
Slide 106: Innovation Powering Safran
C2 - Restricted INNOVATION POWERING SAFRAN Stéphane CUEILLE, Chief Technology Officer 106 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 aut
Slide 107: Technology, key to our competitiveness
C2 - Restricted Technology, key to our competitiveness 2018 R&T plan BUSINESSES PROPULSION EQUIPMENT INTERIORS KEY DRIVERS 4.0 Greener Connected and New Usage Passenger Productivity & Autonomous Experience Digital Services TECHNOLOGIES 107 Safran - Capital Markets Day 2018 / November 29, 2018 This d
Slide 108: A growing investment in R&T and Innovation
C2 - Restricted A growing investment in R&T and Innovation 2018 Self-funded R&T and Innovation (€M) Forecast SAFRAN 700 +170 600+ 600 RT&I 500 +140 460* 400 317 €460M* 300 200 ~3,000 FTE | 900 patents / year 100 0 2014 2018e 2018 2022e 2022 * Self-funded R&T 2018 – including Zodiac Aerospace (€30M)
Slide 109: R&T and Innovation organization and processes
C2 - Restricted SAFRAN R&T and Innovation: state of the art organization and processes 2018 R&T roadmaps Shared resources Corporate initiatives Ecosystem 40 600 4 30 Safran roadmaps Corporate Scientists Initiatives On Going Strategic partnerships Products SAFRAN TECH HYBRID SAFRAN R&T CENTER PROPULS
Slide 110: Safran at the core of energy & propulsion challenges
C2 - Restricted SAFRAN at the core of energy & propulsion challenges 2018 CO2 reduction challenge Ultra-efficient gas Hybrid propulsion Use of turbine propulsion and Electrification Low Carbon Fuels 2005 2010 2020e 2030e 2040e 2050e 110 Safran - Capital Markets Day 2018 / November 29, 2018 This docu
Slide 111: High efficiency advanced turbine propulsion
C2 - Restricted High efficiency advanced turbine propulsion 2018 Open Rotor: a key milestone achieved – a true option for the future The only engine architecture allowing a 15% reduction of fuel Clean Sky SAGE2 Full-Scale Open Rotor consumption and CO2 emissions compared to the LEAP Engine Ground Te
Slide 112: Optimizing energy onboard the aircraft
C2 - Restricted Optimizing energy onboard the aircraft 2018 Auxiliary Jet Engines Power Units Electrical Distribution Fuel Cells Transmission Generators Power Wiring Systems & Motors Electronics Electric Taxiing Ram Air Turbines 112 Safran - Capital Markets Day 2018 / November 29, 2018 This document
Slide 113: Pioneering hybrid electric energy & propulsion
C2 - Restricted SAFRAN pioneering hybrid electric energy & propulsion 2018 A stepped approach Potential of new usage, lower electrical power, shorter distance Electrical < 1,000 V > 1,000 V 10 MW Power / Voltage 1 MW 500 kW 100 kW Battery energy density 2021 2025 2025+ 2030+ 2040+ E-TAXIING Bi-turbi
Slide 114: VTOL hybrid electric distributed propulsion
C2 - Restricted Vtol hybrid electric distributed propulsion 2018 Generator Full scale flight demo 2021 with Bell High power density First test of a full hybrid integrated electrical engine propulsive system (June 2018) 114 Safran - Capital Markets Day 2018 / November 29, 2018 This document and the i
Slide 115: Advanced materials & manufacturing processes
C2 - Restricted Advanced materials & manufacturing processes 2018 Polymer matrix composites Ceramic matrix composites A core capability for product 10% weight benefit, enabling performance +200°C & -60% weight: advanced propulsion efficiency and industrial A game-changing class of material competiti
Slide 116: Additive manufacturing: making it a reality
C2 - Restricted Additive manufacturing: making it a reality 2018 Accelerating transition Benefits from R&T to Product insertion Weight across Safran Ambitious targets for new Lead time designs / products Performance Supported by full scale demonstrators Supply-chain dependency Reduction of
Slide 117: Digital at the core of our business processes
C2 - Restricted Digital at the core of our business processes 2018 Manufacturing – Services – R&D 117 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
Slide 118: Data Analytics supporting the ramp-up of LEAP
C2 - Restricted Data Analytics supporting the ramp-up of LEAP 2018 Manufacturing process optimization Benefits First time yield improvement Cost reduction Automated Process Data Data Analytics Optimization of assets Collection Example Forging dies life durability multiplied by 2.5 118 Safran -
Slide 119: Autonomous systems
C2 - Restricted Autonomous systems 2018 Embedded Defense Robotics All Weather Optronic Sensor Critical Electronics & Software Solution Safe and Secure Drones Navigation Certifiable Artificial Intelligence System Safran Tech Autonomous Systems Lab Pilot Assistance Joint lab with Automotive Industry A
Slide 120: Innovation in cabin
C2 - Restricted Innovation in cabin 2018 Connected cabin ZEO: Safran design studio ● Passenger experience ● A unique combination of industrial design, advanced concept engineering and a mockup & prototype shop ● Operations & maintenance ● An open, collaborative environment dedicated ● New revenue ge
Slide 121: 3rd Q&A session
C2 - Restricted 3rd Q&A session ZODIAC AEROSPACE INTEGRATION AND R&D Hélène MOREAU-LEROY, Zodiac Aerospace Integration Vincent MASCRÉ, Zodiac Aerospace CEO & Zodiac Aerospace Seats CEO Norman JORDAN, Zodiac Aerospace Cabin CEO Stéphane CUEILLE, Chief Technology Officer 121 Safran - Capital Markets D
Slide 122: Closing remarks
C2 - Restricted Closing remarks by Philippe PETITCOLIN, CEO 2018 The most successful Aerospace and Defense company worldwide, ready to capture future growth Focused at the same time on both short and long term with: ● An extreme attention to execution and operational excellence ● Growing investment
Slide 123: Disclaimer
C2 - Restricted Disclaimer 2018 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 in
Slide 124: C2 - Restricted 124 Safran - Capital Markets Day 2018 / November 29, 2018
C2 - Restricted 2018 124 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 authorization of Safran