Tier 1 supplier in Aerospace, Defence & Security · Selected to equip its Citation Longitude business jet Silvercrest: an integrated propulsion ... on Charles-de-Gaulle aircraft carrier

Ce document et les informations qu’il contient sont la propriété de Safran. Ils ne doivent pas être copiés ni communiqués à un tiers sans l’autorisation préalable et écrite de Safran.

0 / INVESTOR MEETINGS / SEPTEMBER 2013 / Q3 REVENUE 2011 / OCTOBER 21, 2011 /

/ October 2013 /

Tier 1 supplier in

Aerospace, Defence & Security

Investor roadshows & conference

1 /


INVESTOR MEETINGS / SEPTEMBER 2013 /

2012 revenue by activities

Revenue €13,560M

Recurring op. income €1,471M (10.8% of revenue)

Net income - Group share €999M (€2.41/share)

Free Cash Flow €564M

Net debt position (Dec. 31) €932M (15% gearing)

27%

10%

52%

11%

Aircraft Equipment

Defence Aerospace Propulsion

Security

Tier 1 supplier in Aerospace - Defence - Security

FY 2012

€13.6Bn

2 /



Leading market positions

#1 ww Single aisle engines

Helicopter turbines

Landing gear

Wiring

Power transmission

#2 ww Space Propulsion

Engine nacelles

Wheels & brakes

#4 ww

Military engines

Aerospace Security Defence

#1 Europe Optronics

#3 ww Inertial navigation systems

#1 ww Biometric and ID solutions

A leader in aviation markets Detection


3 / INVESTOR MEETINGS / SEPTEMBER 2013 /

/ 5 key themes / Summary of Q3 2013 revenue announcement

Positive trends in civil aftermarket

Electrical Green Taxiing System

Cash allocation in line with Group strategy

Outlook: 2013 guidance and 2015 view



LEAP program status

Commencement of ground testing : a critical

milestone achieved

Launch of a 3-year certification programme

3 applications

60 test engines

Simulation of 15 years of operation

40,000 cycles

Certification of LEAP-1A in 2015, EIS 2016

Preparing for production readiness

CFM has a world-class supply chain

LEAP ramp-up supported by CFM56 success

Investments in new and enhanced manufacturing facilities

and technology

1,131 firm orders and commitments received so far in 2013

Bringing total backlog to 5,483 engines

LEAP-1A engine commenced ground

testing on September 4, 2013



Silvercrest program status

Today’s most advanced business jet engine now

powering the Falcon 5X

Safran will provide a complete propulsion system for the

Dassault Falcon 5X

Previously signed but unnamed customer

Testing commenced in 2012

Ground tests

Dedicated flying test bed

Certification of Silvercrest in 2015, EIS of Falcon 5X in 2017

Silvercrest has also been chosen by Cessna

Selected to equip its Citation Longitude business jet

Silvercrest: an integrated propulsion

system for the Falcon 5X



Q3 2013 business highlights

Helicopter turbines: service contract

Defence: laser gyro inertial navigation Morpho: biometry

Agreement with INTERPOL to provide automated biometric

identification systems, security solutions and to collaborate

on the subject of border security.

Turbomeca will support the fleet of RTM 322 engines powering

the UK MoD Merlin and Apache helicopters under a 6-year,

£367 million contract.

Modernization of the navigation and alignment system

on Charles-de-Gaulle aircraft carrier.

Security: detection

Nice Côte d’Azur International Airport in Nice, France

purchased four high-speed CTX 9800 DSi™ explosives

detection systems

7 /



Q3 2013 and 9m 2013 financial highlights

Q3 2012 Q3 2013

3,134 3,437

(€M)

+9.7%

Q3 organic growth was 10.9%: contribution of acquisitions (principally GEPS) offset by translation

impact of weaker forex, notably USD, GBP, CAD, BRL and INR

Aerospace (Propulsion and Equipment) activities continue to benefit from civil aftermarket growth

and original equipment momentum

Civil aftermarket was up 45.2% in Q3 in USD terms, comparing the robust level of revenue in Q3

2013 to the dip in activity in Q3 2012. Maintenance of recent CFM56 and GE90 engines drove

revenue growth. Year-to-date growth was 25.5%: favourable positioning to achieve low-teens annual

guidance despite a tough comparison base in Q4

Defence revenues were slightly up in Q3; Security declined due to adverse currency variations

9m 2012 9m 2013

9,547 10,503

(€M)

+10.0%

8 /



Q3 2013 revenue by activity

Main growth drivers

Positive OE volumes:

Propulsion: increasing rates of assembly of narrowbody aircraft (CFM56) and favourable volume and mix in high thrust engine modules (GE90)

Equipment: increased deliveries of landing and wiring systems (787, A320, A330), of thrust reversers (A320, A330) and of nacelles ( A380, regional and business jets)

Continued momentum in civil aftermarket, thanks to the contribution of recent CFM56 and GE90 engines

Growth in Avionics, primarily due to the strength in the inertial navigation activity

Offsetting impacts

Currency variations, affecting Security activities (translation effect)

Adjusted data (in Euro million)

Q3 2012 Q3 2013 Change

reported

Change

organic

Aerospace propulsion 1,635 1,815 11.0% 12.9%

Aircraft equipment 850 990 16.5% 14.9%

Defence 276 278 0.7% 2.2%

Security 371 354 (4.6)% 0.3%

Others 2 0 na na

Total revenue 3,134 3,437 9.7% 10.9%

9 /



9M 2013 revenue by activity


9m 2012 9m 2013 Change

reported

Change

organic

Aerospace propulsion 4,901 5,588 14.0% 14.7%

Aircraft equipment 2,637 2,951 11.9% 9.9%

Defence 916 876 (4.4)% (3.7)%

Security 1,090 1,087 (0.3)% 1.7%

Others 3 1 na na

Total revenue 9,547 10,503 10.0% 10.1%

10 /



Aerospace OE / Services revenue split

Revenue


9m 2012 9m 2013 % change

OE Services OE Services OE Services

Propulsion

% of revenue

2,625

53.6%

2,276

46.4%

2,899

51.9%

2,689

48.1% 10.4% 18.1%

Equipment

% of revenue

1,878

71.2%

759

28.8%

2,094

71.0%

857

29.0% 11.5% 12.9%








12 /



9M 2013: positive trends in civil aftermarket

Civil aftermarket up 25.5% (in USD) YoY: Q1 +10.0%, Q2 +24.4%, Q3 +45.2%

Reported growth benefited from an increasingly favourable comparison

base (Q3 2012 was a low point)

Recent CFM56 and GE90 engines both contributed strongly

Usage of Used Serviceable Materials remains under control

Aftermarket recoupling to airline activity Confirms CFM long-term spares growth outlook

IATA upgraded its global outlook for the airline industry in 2014

Confirmation of the FY 2013 guidance Robustly growing business in 9M 2013

But Q4 2013 will face a tough comparison base (Q4 2012 was strong)

Civil aftermarket to grow by a percentage

in the low-teens in 2013

13 /



High confidence in the aftermarket potential

The behaviour model

Understands volatility and better forecasts short term

Allows sales team to adjust offerings to airlines

Optimises CFMM strategy to protect the spare part market

Confirms aftermarket trends at 2025 horizon

Increasing long term maintenance contracts

Gradual shift in business model

Civil aftermarket is the right indicator going forward

14 /



Dedicated project decided

in 2011

Analysis concluded that

maintenance behaviour could differ

from one airline to another,

impacting new spare parts sales

Segment behaviour also varies

according to economic context and

air traffic

New model based on airlines

segmentation

Differentiate segments according to

maintenance behaviour

Simulate airlines’ reaction to

changing macro-economic

environment

Forecasting spare parts business opportunity:

the new “behaviour” model

Customer

Economics

Engine constraints

Air traffic forecast

Airlines maintenance behaviour

Maintenance contracts

Theoretical aging

15 /



Forecasting spare parts

Airlines maintenance behaviour segmentation

Allocate the customer base to segments with distinct maintenance behaviour

Long/short term financial horizon

Propensity to purchase OEM parts

Reaction to economic context

More than 30 parameters statistically analysed

Customer base segmented into 10 categories

16 /



Forecasting spare parts

Outcome of the new model (CFM56 spare parts forecast)

Expected CFM56 spare parts

revenue profile

CFM56 spare parts revenue to increase

consistently and to peak by around 2025E

Revenue should double from 2010 dip before

2020E

1st generation CFM56 spare parts potential to fade

out within 5 years from now

The new model confirms 2025 horizon

“Behaviour” model adds increased visibility on the short term

2007 2010 2013 2016 2019 2022 2025 2028

2x 3x

2010 dip

x

17 /



T&M: Time & Material

CFM is paid at the time of the actual shop visit on the basis

of an agreed-upon scope of material and labour

income, expenses and cash impact coincide

MSA: Material Service Agreement

CFM guarantees commercial conditions of parts supply

to airline/MRO providers

RPFH: Rate Per Flight Hour

CFM receives a fixed sum per flight hour based on estimated cost to

perform engine maintenance to meet performance and availability

guarantees

decoupling of revenue & cash-in with costs & cash-out

ESPO (Engine Service Per Overhaul): fraction of revenue booked

progressively and remainder booked at the time of SV

ESPH (Engine Service Per Hour): revenue booked progressively

Service agreements

A variety of aftermarket options tailored to needs

Service programmes aiming to

support airlines on a predictable

cost per engine flight hour

basis, to enable accurate

forecasting of operating costs,

reduced cost of ownership, and

improved asset utilisation

18 /



Long Term Service Agreements: LEAP status (June 2013)

Engines sold to airlines

99% LEAP-1A A320neo covered* by RPFH contracts

66% LEAP-1B 737 MAX covered* by RPFH contracts

hence average 76%

~2,000 LEAP aircraft sold (A320neo & 737 MAX)

423 to lessors (22%) Services agreements to be

decided later with end users (airlines)

1,540 to airlines: almost all of them ask for specific

terms and conditions on services during sales campaign

Almost 100% of LEAP orders to be covered by CFM

long term service contracts (excl. lessors)

= Visibility & spare parts market protected

*Signed or under discussion

76% 24%

RPFH* MSA*

78%

22%

Airlines Lessors








20 /



Basic concept of the EGTS

EGTS uses electrical power to enable the aircraft to push-back and taxi without the main engines running

Electric motors integrated into main landing gear for maximized

performance, traction and agility

EGTS provides significant savings and “green” benefits, reducing:

Fuel use

Emissions

Noise

Need for ground tug

Other Direct Operation Costs

Target savings: ~4% block fuel reduction depending on mission

21 /



EGTS: innovation bringing substantial benefits

fuel use

emissions and noise

operational efficiency

other Direct Operating Costs

• Net ~3% block fuel savings per average flight cycle (750NM) when using EGTS

Increasing aircraft efficiency with a reduced environmental impact

EGTS can deliver

Up to 4% savings

total block fuel

consumption

Foreign Object Damage

22 /



Potential market for single aisle and large regional aircraft (2016-31E)

Forward fit: ~12,000 aircraft

80% are eligible (potential savings at least $ 150 k annually)

Shipset value determined from projected savings on a case-by-case basis

Most revenue is OE supply for upfront payment; initially small service

& aftermarket opportunity

Airlines expect a payback from operational savings in 3-5 years

Programme R&D included in our 2015 view

IRR in line with global Group targets

Plus Retrofit on current fleet

EGTS outline business model

23 /



On-aircraft testing: on time and above expectations

Experience it every day at 2013 Paris Air Show!

From lab tests to live demo at 2013 Paris Air Show

Extensive aircraft

and lab testing

Fully integrated system demo

Full system successfully tested since Dec. 2012 in bench test

On-aircraft testing began end of March 2013

More than 160km accomplished to date








25 /




Research & Development Create a distinctive difference through technological innovation (long term)

Spending reflects winning some attractive new business (medium term)

Capital expenditure Modernize existing sites and strengthen the international scope

Acquisitions Accelerate or establish positions in critical areas at justified price

Dividend payments Grow cash returns to shareholders

40% payout of adjusted net income since 2007

Bu

sin

ess

Sh

are

ho

lders



Investing for the next 30 years

0

250

500

750

1000

1250

1500

1750

2000

2007 2008 2009 2010 2011 2012 2013E

In €M

Total self-funded cash R&D

Gross capitalized R&D

Self-funded cash R&D to peak in 2013-2014 (9% of revenue)

R&D level progressively to return to a normative

6-7% of sales at the end of the decade

Long term amortization of capitalized R&D remains

sustainable at less than 1% of sales

€1,103M

€504M

Total R&D effort

Current R&D spending reflects recent wins

in long term attractive businesses

€1,594M

27 /



Industrial investments: raising capacity & efficiency

Towards the right balance by 2015E 60% BUY / 40% MAKE

MAKE & BUY: >35% in $ and low cost countries

4 main industrial platforms Europe, Americas, South-East Asia, North Africa

Implementing industrial policy Europe: new technologies, modernised plants, higher

efficiency

Rest of the World: capacity growth, proximity with our

customers

Commercy, France

Capex to increase moderately in 2013 - Should remain

between 3-4% of sales range in the coming years

28 /



Acquisitions: objectives & criteria

HLP Electrical Power Systems

RTM322 programme

Buy “installed base”

& “customer access” Buy “technology assets”

M&A financial criteria

Cover cost of capital within 3 years (RoCE)

A deal should be EPS accretive in year 1 ideally. If not, in year 2

ROI in the range of 10 to 12% Pe

rfo

rman

ce

B

ala

nce

sh

ee

t Net debt/EBITDA around 2.0x. 2.5x max at peak for a limited period of time

Interest cover ratio at 6x (= EBIT / Interest expense)

Colombia/Peru

Post-tax cost of capital of 8%

(aerospace & defence)

and 9.5% (security)

http://www.google.fr/imgres?imgurl=http://aerospacemall.com/uploads/presenters/79129d1a573a27ea9422b85e36dab9cd.gif&imgrefurl=http://aerospacemall.com/companies/view/1324&usg=__bruv1VM433kPRMq252e28wtYWtQ=&h=314&w=416&sz=11&hl=fr&start=7&zoom=1&um=1&itbs=1&tbnid=lf6OYdDg_j80QM:&tbnh=94&tbnw=125&prev=/images?q=harvard+cable+manufacturing&um=1&hl=fr&sa=N&tbs=isch:1

http://www.google.fr/imgres?imgurl=http://www.yourlogoresources.com/wp-content/uploads/2011/11/Goodrich-logo.gif&imgrefurl=http://www.yourlogoresources.com/goodrich-logo/&usg=__gfnOLAJTS7hlrKHylbpa3L5eHrc=&h=411&w=1474&sz=96&hl=fr&start=2&zoom=1&tbnid=DXduyf4r6Jl0DM:&tbnh=42&tbnw=150&ei=hLqbUJmaJI6o0AXek4HYDw&prev=/search?q=goodrich&um=1&hl=fr&sa=N&gbv=2&tbm=isch&um=1&itbs=1








30 /



2013 outlook and 2015 view

Organic adjusted revenue above €15bn

Adjusted recurring operating margin heading to the mid-teens

Free cash flow generation trending to 50% of adjusted recurring operating

income

Cash: dividend distribution to shareholders

Adjusted revenue expected to increase by a percentage in the mid

to high single digits

Adjusted recurring operating income expected to increase

by around 20%

Regarding free cash flow, cash flow linked to business performance is likely

to be consistent with objectives, while uncertainty remains concerning the

rhythm of payments (including advance payments) by State-customers in the

fourth quarter

2013 outlook

2015 view



/ Annexe /

Additional information

32 /



H1 2013: Quantities of major aerospace programs

Number of units delivered

9m 2012 9m 2013 % change

CFM56 engines 1,056 1,145 8%

High thrust engines 385 450 17%

Helicopter engines 671 713 6%

M88 engines 16 16 =

A380 nacelles 72 72 =

A330 thrust reversers 105 124 18%

A320 thrust reversers 342 399 17%

Small nacelles (biz & regional jets) 370 400 8%



H1 2013 financial highlights

Growing adjusted revenue with strong performance in Aerospace

H1 12

restated*

H1 13

6,413

7,066 +10.2%

Adjusted recurring operating income at 12.0% of revenue

H1 13

687

847 +23%

Higher adjusted net profit (group share) at €1.58 per share, including €0.31 from the

sale of 12.57% of Ingenico share capital

H1 12

restated*

H1 13

414 658 +59%

(€M) (€M)

(€M)

H1 12

restated*

Limited net debt (19% gearing)

Dec. 31,

2012

June 30,

2013

(932)

(1,202)

(€M)

June 30,

2012

(1,129)

Improving Free Cash Flow conversion rate

H1 12 H1 13

104 157 +51%

(€M)

(*) 2012 has been restated to reflect the changes induced by IAS19 Revised

34 /



H1 2013: income statement

Of which cost of debt

of €(15)M

(In €M) H1 2012

restated H1 2013

Revenue 6,413 7,066

Recurring operating income

% of revenue

687

10.7%

847

12.0%

Profit from operations

% of revenue

668

10.4%

824

11.7%

Net finance (cost) income

Income tax expense

Share in profit from associates

Gain on disposal of Ingenico shares

Profit (loss) from discontinued op.

Minority interests

(80)

(172)

11

-

-

(13)

(67)

(231)

10

131

-

(9)

Profit - group share

Basic EPS (in €)

414

1.00*

658

1.58**

* Based on 414,658,530 shares

** Based on 416,151,726 shares

Effective tax rate

of 31%

Net profit growth of 59%

Post-tax capital gain

from placement of 12.57%

of Ingenico share capital

35 /



H1 2013: Aerospace Propulsion

Growing revenue

Strong rise in civil OEM deliveries (CFM56, high-thrust and military engines, helicopter turbines)

Favourable trends in civil aftermarket and solid military aftermarket

Excellent profitability mainly driven by civil aftermarket

Aftermarket (recent CFM56 and GE90 engines, helicopter turbine support contracts, M88 maintenance)

Impact of better OE volume and unit revenue for civil engines

Productivity improvements

Positive currency effect

(In €M) H1 2012

restated H1 2013 Change

Organic

Change

Revenue 3,266 3,773 +15.5% +15.6%

Recurring operating income 515 634 +23%

% of revenue 15.8% 16.8%

One-off items - (15)

Profit (loss) from op. 515 619

% of revenue 15.8% 16.4%

36 /



H1 2013: Aircraft Equipment

OE driven revenue growth Increases in OEM production rates (notably Boeing 787) coupled with production start-up of A400M programme,

as well as regional jets market segment

Market share wins in carbon brakes

Significant improvement in profitability Favourable mix/volume impact on harnesses and landing systems (Boeing 787, A330, A320)

Carbon brakes: high returns as a result of a larger installed base and continued air traffic growth

Positive currency effect

3 months contribution of GEPS: €47M in revenue and €3M in profits (6.4% of revenue)

(In €M) H1 2012


Organic

Change

Revenue 1,787 1,961 +9.7% 7.6%

Recurring operating income 136 175 +29%

% of revenue 7.6% 8.9%

One-off items (7) (3)



37 /



H1 2013: Defence

High-single digit growth in Avionics with a satisfactory profitability level

Higher deliveries of guidance kit modules and solid Flight Control Systems activity

Combination of favourable mix/volume effect with lower manufacturing costs

Mild decrease in Optronics slightly impacting profits

Delivery of the Felin infantry combat system to two regiments of the French Army

Long-range infrared goggles down compared to a very strong first-half 2012

(In €M) H1 2012


Organic

Change

Revenue 640 598 (6.6)% (6.3)%

Recurring operating income 45 45 -


One-off items - 2



38 /



H1 2013: Security

(In €M) H1 2012


Organic

Change

Revenue 719 733 +1.9% +2.4%

Recurring operating income 66 66 -


One-off items (10) -



Solid trends in Identification

MorphoTrust delivered performance as per initial expectations at time of acquisition, driven by increased

volumes in driving licences and passports, as well as the on-going nationwide implementation of the

federal Unified Enrolment System (UES), while achieving full cost synergies

Renewed momentum in biometric identity solutions in emerging countries: Kenya, Egypt, Mali, India…

e-Documents: mixed performance in smart cards for both telecom and banking markets

Detection: temporarily low Trace volumes and unfavourable mix on Explosive Detection Systems impacting

margins



H1 2013: R&D by activity

(In €M) H1 2013 Propulsion Equipment Defence Security

Total self-funded cash R&D (590) (354) (117) (57) (62)

as a % of revenue 8.3% 9.4% 6.0% 9.5% 8.5%

Tax credit 65 22 19 18 6

Total self-funded cash R&D after tax credit (525) (332) (98) (39) (56)

Gross capitalized R&D 290 214 60 11 5

Amortised R&D (37) (14) (16) (5) (2)

P&L R&D in recurring EBIT (272) (132) (54) (33) (53)

as a % of revenue 3.8 % 3.5% 2.8% 5.5% 7.2%

40 /



Fx hedging: improving rate in 2014

Hedge portfolio, October 15, 2013

Achieved

Target

1.37

1.32

1.28

1.27

1.27

1.25

1.26

1.25

1.25

Estimated exposure needs

In US$ bn

€/$ hedge rate

Approx. 50% of Safran US$ revenue naturally hedged by US$ procurement

Total: $14.7bn 2013 and 2014 are fully

hedged

2015 hedging almost

finalized

$5.1bn achieved at $1.25

to rise to $5.4bn at $1.26

as long as €/$<1.42 in

2013 and 2014

Further increase in 2016

hedging

$3.4bn achieved at $1.25

to rise to $4.9bn at $1.25

as long as €/$<1.42 up to

end of 2014

~5.4 ~5.4

41 /



Fx hedging: benefiting margins over 2013-2016

Estimated impact on recurring operating income

of targeted €/$ hedge rates

c.120 135

155

1.37

1.32

1.26

2012 2013E

1.28

2014E 2015E

c.30

200

100

0

-100

EBIT impact

vs. previous

year (in €M)

1.2

1.3

1.4

1.1

1.35

1.25

1.15

1.05

1.0

€/$

hedge

rate

300

2011

c.30

2016E

1.27 1.25

c.30

Cumulative €210M tailwind in profits over 2013-2016E

42 /



Equity shareholding

As of July 31, 2013

French State

27.1% Public

57.9%

Treasury shares

0.1%

Employees

14.9%

Free float continued to increase

As of Dec. 31, 2012

French State

30.2% Public

54.1%

Treasury shares

0.3%

Employees

15.4%

43 /



0

100

200

300

400

500

600

700

800

0

5 000

10 000

15 000

20 000

25 000

30 000

82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14E 16E 18E 20E 22E 24E

CFM Gen 1 CFM Gen 2 Global spare parts revenue (in $ - 100 base in 2000)

CFM56: strong prospects until 2025 and beyond

CFM56 active installed fleet to peak by 2017E

at ~26,400 engines (~31,000 deliveries)

CFM56 spare parts revenue to peak by around 2025E

44 /



LEAP: a gradual build up starting in 2016

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

~3,000 LEAP engines by 2020E

~10,000 LEAP engines by 2025E

LEAP services revenue should reflect

Rate Per Flight Hour contracts

with smoother progressive revenue flows,

depending on contract terms

Global services revenue

LEAP engines



2008 – 2012: operating cash flows fund growth

(932)

Divestments

298

(in €M)

(169)

552

Dividends

5,963

(682)

Net debt at Dec 31, 2007

Cash flow from ops

Acquisitions

Net debt at Dec 31, 2012

Change in WC

Tangible capex & R&D

€2,966M Free cash flow

(1,053)

(2,292)

(3,549)

Others

Operating cash flows paid R&D, capex, dividends

and acquisitions

46 /



Dividend payments rose with strong operating cash flow generation

40% payout on adjusted net income since 2007

2007 2008 2009 2010 2011 2012

104 152

256 202

0.50

0.25 0.38

0.62

Dividend

distribution

(€M)

Dividend

per share

(€)

0.96

400

0.40

167

Consistent dividend practice

€1.3bn distributed to shareholders since 2007

47 /



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 Snecma

and its subsidiaries and reflects the Group’s performance in civil aircraft engines

aftermarket compared to the market.

