Airbus Se Unsp/Adr

Thank you, Kai. Good morning, ladies and gentlemen. This is the Airbus H1 2020 results release conference call. Guillaume Fauré, our CEO, and Dominique Asam, our CFO, will be presenting our results and answering your questions. This call is planned to last around one hour and 15 minutes. This includes Q&A, which we'll conduct after the initial presentation. This call is also webcast. It can be accessed via our homepage, where we have set a special banner. Playback of this call will be accessible on the website, but there is no dedicated phone replay service. The supporting information package was emailed to you earlier this morning. It includes the slides, which we will now take you through, as well as the financial statements. Throughout this call, we will be making forward-looking statements. The package you receive contains the safe harbor statement, which applies to this call as well. Please read it carefully.

Now, over to Guillaume. Thank you, Thorsten, and good morning, everyone. Welcome to our H1 2020 results, and thank you for joining today. As you're aware, COVID-19 triggered an unexpected and unprecedented situation for the aerospace industry, and its scale required us to promptly deploy an adaptation plan to adjust our business to the new commercial aircraft environment. The latest view on commercial aircraft business is consistent with the commercial aircraft rate set by Airbus in April. We may still make minor adjustments, but we have growing clarity for the short term, I mean 2020 and 2021. And from today's perspective, we believe that we have defined the right calibration point that fits with the new environment or the understanding we have today of this new environment. Our industrial system, including our whole supply chain, has adjusted to the new levels and we are producing in accordance with the new production plan. This makes me confident that we are capable to further adapt in case the situation evolves. Actually, we launched a wide range of cash containment measures. We adjusted our incoming supply to manage our working capital. We deployed the available partial unemployment schemes to flex our workforce. We reviewed our R&D roadmap and other fixed costs and cut 2020 capex while still protecting key projects like the F321 XLR or DDMS project, the ones that are key to prepare the future. We're also addressing our long-term cost structure. We have announced plans to adapt our global workforce and resize our commercial aircraft activity. This adaptation is expected to result in a reduction of around 15,000 active workforce positions no later than summer next year, summer 2021. We're working with our social partners in order to limit the social impact in this bigger picture of huge impact on economies. We will rely on the full set of measures available, made available, while retaining our skills, competencies, and know-how as much as possible so we can be ready to meet our customer demand when the market recovers, because we believe it will recover. Our H1 financials reflect COVID-19 impacts coming through in the second quarter, mitigated by our adaptation measures. In Q2, We delivered 74 aircraft, slightly ahead of my expectation when entering into the crisis, end of Q1. Our H1 EBIT adjusted was at minus €0.9 billion, driven by commercial aircraft deliveries, which were 193 aircraft lower year on year, so roughly half of what it was in the first half of 2019. EBIT adjusted also includes a 0.9 billion euro COVID-19 related charges, which are not shown as adjustments. Free cash flow before M&A and customer financing is at 12.4 billion, of which minus 4.4 billion euro in Q2. Minus 4.4 billion euro free cash flow before M&A and customer financing in Q2. Our Q1 free cash flow excluding the fine under the deferred prosecution agreement was also at minus 4.4 billion euros, which demonstrates that in spite of only 74 deliveries in Q2, demonstrates that the measures we have launched to contain cash, including the adjustment of incoming supply, have already delivered results in Q2. They are partially compensated for the lower cash flow from the low number of deliveries in the quarter, the 74 I was mentioning before. The strong liquidity position we have built will support us in our ongoing efforts. It will also enable us to act in case new challenges are to come. And we are preserving our ability to invest, innovate, grow, and perform again after the crisis to ensure we can return to normal operations in a strong position once the situation improves again. Before we look at our commercial aircraft environments, let me come back to the WTO disputes. We recently agreed with the governments of France and Spain to make amendments to the F-350 RLI, the repayable launch investment contracts, to reflect what the WTO considers the appropriate interest rates and risk assessment benchmarks. With this final move, Airbus considers itself in complete compliance with all WTO rulings, with no doubt. From my perspective, this removes any justification for U.S. tariffs moving forward. Now, to our commercial aircraft environment in more details, the latest World Economic Outlook projects global GDP growth at minus 4.5, so close to minus 5 percent, sorry, at minus 4.9%, so close to minus 5% in 2020. Latest IATA figures show that the RPK in June were at 13.5% versus last year. Domestic travel was at about 32% with China on the recovery reaching about 65% and international air traffic was about 3% versus June 2019. which was a very low level we've been in. Airlines remain in a difficult situation, and there are as many situations as there are customers, very large diversity of situations. They have been reviewing their fleet planning, and we've been working closely with them to find mutually acceptable agreements and to align on a new delivery profile, airline by airline, that gives visibility to the customers and to us by defining a new way forward. Our assessment is that air traffic would reach its 2019 level again somewhere between 2023 to 2025. The single-line market is expected to lead the recovery while we believe wide body should take longer. The current market situation has led us to slightly adjust A350 rates from six to five per month for now. For my discussions with customers, and there are many, It appears that they're flying our products more than others during the crisis, and they tell me that we have the right product line for the post-COVID-19 world. Finally, I'd like to thank our ECAs, including EDC, for their continuous support, and we expect ECA financing to increase. Now looking at H1 orders. In H1, we booked 365 gross orders, largely driven by leasing companies. In Q2, despite being the worst quarter in the history of aviation, our net orders were roughly stable with actually plus eight aircraft. Net orders stand at 298 aircraft, so close to 300 aircraft as of H1. And our backlog remains high at 7,584 aircrafts. We recorded 67 cancellations, of which only one in the second quarter. Looking at helicopters, in H-120, we booked 75 net orders versus 123 in H-119. This included in Q2 some good orders, three five-bladed H-145, the product that's been certified in June. It's a new, very powerful product. We booked one Super Puma and four H-135 for Japan National Police Agency in Q2 as well, and one H-160 in the corporate version, the 160. has been certified as well recently, so we certified two very important products for the future of Airbus helicopters just recently. When it comes to the market, we expect the civil and parapublic segment to remain soft in 2020, particularly in oil and gas, to persist in lower oil prices and pressure on the segment. The support plan announced by the French government in June includes the following future order commitments. Eight H-225M for the French Air Force, then H-160 for Gendarmerie Nationale, and two H-145 for Security Civile, and as well, the second demonstrator of the military drone that we developed for the French Navy. Finally, in defense and space, we had an order intake of 5.6 billion euros. It's 32% more versus last year. And this is including the contract for the development, supply, and integration of 115 Eurofighter E-Scan Raiders for the German and Spanish Eurofighter fleets. As well, the contract to upgrade the training capabilities of the German Eurofighter pilots and the contract renewal to support the A400M French Air Force Training Center in Orléans. We continue to see opportunities in the field of defense with our European governments, Europe feels the need to prepare for the sovereignty of the future, which includes the air and space power, to protect its territory from the skies, and Airbus will play a major role in that, given our European presence and scale, and our technologies and products. Now, Dominique will take you through our H1 financials. Dominique, the floor is yours.

Thank you, Guillaume, and good morning, ladies and gentlemen. I hope you're well and remain safe. The H1 financials clearly show the impact directly linked to COVID-19. Revenues decreased to 18.9 billion euros, down 39% year-on-year, driven by the difficult market environment impacting our commercial aircraft business, as we delivered about 50% less aircraft year-on-year, partially offset by the appreciation of the US dollar. Our H1 EBIT adjusted was minus €0.9 billion, reflecting the lower deliveries in commercial aircraft and some idle costs. We've taken the necessary steps to adapt our cost structure to the new levels of production, and the benefits are materializing as we execute our plan. H1 EBIT adjusted also reflects charges recorded due to the impairments and write-offs following a comprehensive review of the balance sheet triggered by COVID-19. Our H1 earnings per share adjusted stand at a loss of 1 euro 1 cent per share, using an average of 783 million shares. Our H1 free cash flow before M&A and customer financing was minus 12.4 billion euros, of which minus 4.4 billion in Q2. As Guillaume mentioned, our Q2 free cash flow reflects the lower cash flow resulting from the unusually low number of deliveries, partially compensated by our efforts on cash containment. Going forward, and in the absence of any unforeseen escalation of COVID-19 and new travel restrictions, it is our ambition not to consume cash before M&A and customer financing in the second half of the year. Now, onto the page with more details on our profitability. H1 2020 EBIT reported was minus 1.6 billion euros, The level of EBIT adjustments totaled a negative 614 million and included minus 332 million related to the A380 program cost, of which minus 299 booked in Q2. Minus 165 million impact from foreign exchange and balance sheet revaluation, of which 31 minus 31 in Q2. Minus 117 million of other costs, including compliance costs, of which minus 82 in Q2. Earnings per share reported include minus $429 million of financial results. It mainly reflects a net $212 million negative related to Dassault Aviation, as well as the impairment of a loan to OneWeb recorded in Q1 for an amount of minus $136 million. The tax rate on the core business is around 27%. The effective tax rate on net loss is 3%. impacted by impairments in certain tax jurisdictions and on certain investments. The resulting net loss is minus 1,919,000,000. Loss per share reported was minus 2.45 euros. In the context of COVID-19, we are progressing in the discussions with our social partners. A restructuring provision is expected to be recognized once necessary conditions are fulfilled. The amount is expected to be between 1.2 and 1.6 billion euros. Now on to our hedging activities. Our total hedging portfolio in U.S. dollars stands at 87.8 billion dollars with an average hedge rate of 1.23. In H1 2020, we implemented 2.4 billion of forwards, of which 2.1 billion in Q1. Seven billion dollars of hedges matured at a rate of 1.18 in H1 with associated EBIT impact and another 2.9 billion of Q2 hedges will be rolled in Q3. In addition, 1.8 billion dollars of hedges have been disqualified in H1 with maturity dates mainly from 2022 and beyond, resulting in a negative impact to financial results of approximately 0.1 billion euros. In the second quarter, we rolled 3.3 billion dollars of hedges mainly from Q2 to Q4 of 2020. In order to adjust our portfolio to the new delivery profile, we have been rolling existing hedges to deferred delivery dates while containing the short-term impact on cash also in July. Now let's look at our cash evolution in the first half of 2020. Our gross cash flow from operations of €0.3 billion mainly reflects our EBIT adjusted. We paid the 3.6 billion penalty in Q1 2020. Our working capital, excluding penalties, has increased by 8.3 billion euros, mainly driven by inventory bills and a decrease in trade liabilities. This reflects lower incoming supply and working progress in Q2, while we increased the number of stored aircraft as we were moving to the new production rates. Our inventory, as of the end of June, includes around 145 aircraft that we could not deliver. We target production and deliveries to converge in Q3. PDPs are benefiting from positive phasing impacts. A400M continued to weigh on our free cash flow before M&A, but less so than in 2019. At around €0.9 billion, capital expenditures were stable versus H1 2019. On a full year basis, we still expect capex to be around €1.9 billion. Free cash flow reported was minus 12.9 billion euros. Customer financing actually contributed approximately 67 million positive, while M&A activities accounted for half a billion negative, mainly related to the acquisition of Bombardier's remaining stake in ACLP for about half a billion dollars. Now, let's look at our liquidity as of the end of June. As a reminder, Early in March, we secured sustainable access to funding sources mainly through a 15 billion credit facility. We've also taken additional steps to improve the long-term visibility of our financing and issued euro-denominated bonds with cash proceeds accounted for in Q2. In April, we issued 2.5 billion of bonds with tenors of 5, 8, and 12 years, partially terming out the 15 billion credit facility to 12.5 billion at attractive rates. In June, we issued another 3.5 billion of bonds with tenors of 6, 10, and 20 years. We used part of the proceeds to further reduce the credit facility, which as a result amounted to 9.5 billion as of the end of June. Also, we continued securing additional funding sources by increasing the size of the commercial paper programs in Q2. So all in all, we further improved the robustness of our financing and extended the maturities of our funding sources. The strong liquidity will support us as we continue navigating the crisis and position us for growth once the situation improves. Now back to Guillaume.