Airbus Se Unsp/Adr

Good morning, ladies and gentlemen. This is the ABAS full year 2023 results release conference call. Guillaume Faurie, our CEO, and Thomas Topfer, 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 will conduct after the presentation. This call is also webcast. It can be accessed via our homepage by clicking on the dedicated banner. Playback of this call will be accessible on our website, but there is no dedicated phone replay service. The supporting information package was published on our website earlier today. 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 I invite you to refer to a safe harbor statement that appears in the presentation slide, which applies to this call as well. Please read it carefully. And now, over to you, Guillaume.

Thank you, Hélène. And hello, ladies and gentlemen, and thank you for joining us today for our full year 2023 results call. And I'm happy to be here with Thomas that will run you through our results and also provide color on our outlook for 2024. Let me begin with an overview of last year's business highlights. Across our businesses, we saw a very strong order intake, notably reaching new heights for our commercial aircraft business, as well as for our distance and space division. Global air traffic has now returned to pre-COVID levels. After travel restrictions were lifted, short-haul flights bounced back very quickly, and we now see, as anticipated, a sustained recovery for long haul flights. For commercial aircraft, it's been a landmark year as we reached a record breaking level of aircraft orders and backlog, which gives us long-term visibility and clearly supports the production targets for our single L and wide-body program. In Q4, we delivered 247 commercial aircraft, taking our full year 2023 deliveries to 735 units, a year-on-year increase of plus 11%. We delivered on our 2023 commitments and progressed on our production ramp-ups as planned. Against the backdrop of an operating environment that remains complex and affected by supply chain challenges and geopolitical tensions, I believe this is a significant achievement. Therefore, I want to sincerely thank our customers, suppliers, partners, and, of course, the team Airbus who made it happen. We benefit from our industrial transformation that keeps going with further investment in our production system, as well as from our close cooperation with the supply chain. Over the last two years, our supply chain has been a limiting factor, and we expect that it will still pace our production ramp-up going forward. This said, we carefully assess and target what I call the sweet spots, which is the best balance between demand and the ability of our supply chain to deliver while, of course, and that's very important, maintaining the highest safety standard in our industry. Our plan for 2024 is based on that. Now, looking at our 2023 financial performance, our EBIT adjusted stood at 5.8 billion euros, reflecting our commercial aircraft deliveries, the good performance of helicopters, as well as the charges recorded in certain space programs. Our free cash flow before M&A and customer financing was 4.4 billion euros and is mainly driven by our commercial aircraft deliveries and also reflects the strong performance in all businesses. These financial results with a net income of 3.8 billion euro and our confidence in our future financial performance supports our dividend proposal for 2023 of 1.8 euro per share. The strong free cash flow generation in particular in the last quarter has brought our net cash above 10 billion euro. This underpins our proposal of a special dividend of 1 euro per share. With all that in mind, Let's take a closer look at 2023, starting with commercial positioning, commercial aircraft. 2023 marked the recovery of global air traffic and the return to profitability for the airline industry. We booked a recall level of 2,319 gross orders, including 1,039 in Q4, confirming our customers' trust and our positioning in the market. On the 220, we booked 142 gross orders, including 109 in the last quarter. And with this order intake, we now have a backlog of 600 aircraft. Looking at the A320 family, we booked 1,835 gross orders, an unprecedented level, including 748 in the fourth quarter. This brings our backlog to 7,197 aircraft out of which around two-thirds are for the A321. Moving to the white bodies, we recorded 342 gross orders in 2023, including 182 in Q4, confirming the recovery on the white body market. Net orders amounted to 2,094 aircraft following 225 cancellations, which were largely anticipated and embedded in our backlog valuation as of year end 2022. And our backlog in units stood at 8,598, so very close to 8,600 at the end of December 2023. At group level, our backlog in value increased to 554 billion euros in 2023, mainly reflecting our book to build above one for all divisions, partly upset by the weakening of the U.S. dollar. Looking at helicopters, in 2023, we booked 393 net orders compared to 362 in 2022. Those orders being well spread across programs with a book to build above one, both in units and value. It includes a remarkable performance on the medium segment and services in the last quarter. In the fourth quarter, we signed an agreement with Germany for the purchase of up to 82 military H145M helicopters, the largest order ever placed for this platform. The contract also includes seven years of support and services. We also signed an agreement with the French Armament General Directorate, the DGA, for 42 H145 helicopters, 36 for the security civil, and six for the French Gendarmerie Nationale, plus 22 options. This contract also includes a range of support and services solutions. In addition, the DGA awarded a contract to NHI, to NH Industries, for the production of eight additional NH90s in standard two configuration for the French Army Aviation. Overall, 2023 was a strong year, and we continue to see positive momentum for both civil and military markets. Finally, in defense and space. First, we were pleased to record a strong order inflow throughout the year. In full year 2023, our order intake was at 15.7 billion euros, up 15% year-on-year, corresponding to a book-to-bill of around 1.4. Here also, as for the commercial aircraft business, order intake is reaching new heights. This commercial performance confirms our long-term ambition for the division and highlights the strength of our products. Key orders recorded in Q4 include Spain order for 16 C295s, which will enhance Spain's national security and search and rescue capabilities. On Eurofighter, we're proud to highlight that Airbus will equip 15 German Eurofighters for electronic warfare capabilities. This variant is to be NATO certified by 2030, and will then take the role of the Tornado electronic warfare aircraft. In the area of unmanned aerial systems, we signed a contract with Spain for the SIRTAP, the Next Generation Tactical UAS, unmanned aerial system. The development of SIRTAP will bring key experience and competencies in the field of remote carriers for FCAS, preparing therefore for the future. While on FCAS, we continue progressing on Phase 1B with our partners, we also continue to make progress on Eurodrome. Even though we face delays in some design specifications, we are now working to complete the so-called preliminary design review later this year, in order to enable an entry into service by the end of this decade. On Ariane 6, all hot fire tests necessary for the maiden flight were successfully completed. The first launch is targeted for the summer 2024, subject to the clearance of some final tests. Of space business, has been impacted by further charges in the fourth quarter, and we will come back to that. But before we move to financials, I'd like to give you an update on the transformation that we initiated in the division early 2023, early last year, aiming at making our organization simpler, more agile, and more customer-oriented with more accountability and also, of course, driving competitiveness for the division. At the end of 2023, we reached an important milestone with the finalization of the social dialogue with our European and national social partners. As a result, the new structure went live on January 1st, this year, a few weeks ago, with three business lines. Air power, the biggest one, combining our existing military system and the F-class activities. Second, space systems. And third one, connected intelligence. In this new setup, around 15,000 employees are moving from former central engineering and operation functions to the three aforementioned business lines, giving those the means for a clear end-to-end business ownership and accountability. Hence, they are fully equipped and empowered. This transformation targets excellence from bidding to delivery to secure performance for the future. Let me highlight major initiatives that include stringent and selective bidding in order to improve profitability, quality and operational excellence in production and engineering through specification definition, execution, and risk management, and having the right skills and competencies at the right place. This comes with some changes in management which we are currently implementing. This transformation will also allow to address the long-term cost structure more efficiently. As I have experience with previous transformation programs and given the long-term nature of the business, it will take time to grasp the full benefits of this change, but we will get there and converge towards our high single-digit margin ambition in the mid-term. Voila. Thomas will take you through our financials.

Well, thank you, Guillaume. And hello, ladies and gentlemen, also from my side. I'm on page six of the presentation. And I would now like to take you through our financial performance in a little bit more detail. So as you can see, our full year 2023 revenues increased to $65.4 billion in which is up 11% year on year and mainly reflecting the higher number of commercial aircraft deliveries. If you look at our EBIT adjusted on the upper right hand side of the page, let me start by reminding you where we come from because in the financial year at 2022, we stood at 5.6 billion and that included a net 0.4 billion positive impact from several non-recurring elements. And this resulted from a positive effect from retirement obligations and also from compliance-related topics, partly offset by the loss of the Pleiad neo-satellites and also international sanctions against Russia. Our full year 2023 EBIT adjusted increased to 5.8 billion, mainly reflecting the higher commercial aircraft deliveries, a more favorable hedge rate, and the solid performance at helicopters, partly offset by investments for preparing the future and also the charges in certain space programs. Now when it comes to these charges and building on the work done in the first nine months, we extended actually the scope in the fourth quarter and we reviewed our space programs in depth. And this resulted in 0.2 billion of additional charges from the updates of the estimates at completion. Now as for the full year 2023, the charges total 0.6 billion and have been recorded And they now account for revised timelines and cost estimates, as well as for the reassessment of commercial risk and opportunities. If you look into these 0.6 billion of charges, about one-third reflects the current period, and the remainder is to adjust past and future profits. So therefore, two-thirds is probably the right order of magnitude to be normalized if you want to come to a clean 2023 result. And I would say while this high-tech business, of course, always carries some risks, I now sincerely believe that we have a balanced assessment. And just as a reminder, in 2023, we made further progress on our compliance-related topics, which allowed us to release provisions for an amount of 0.1 billion in the first half of the year. In terms of R&D, our expenses stood at 3.3 billion versus 3.1 in 2022, and the R&D expenses are expected to continue to slightly increase in 2024. Our full-year EPS adjusted stood at €5.60 based on an average of 789 million shares, and our full-year free cash flow before M&A and customer financing was €4.4 billion, reflecting the strong commercial aircraft deliveries and the pre-delivery payments collection from Commercial Momentum mainly in December. Now let's go to the next slide and look at our profitability. Our full year 2023 EBIT reported was 4.6 billion euros and the level of EBIT adjustments totaled a net negative of 1.2 billion euros and you have the details on the upper right hand of the slide so you can see it includes roughly 1 billion 30 million negative impact from the dollar working capital mismatch and balance sheet evaluation mainly reflecting the mechanical impact coming from the difference between the transaction date and the delivery date, of which 224 million occurred in Q4. It also includes 89 million related to the aerostructures transformation, of which 32 million in Q4, and 41 million to the A400M. Last but not least, minus 75 million of other costs, including compliance costs, of which 19 million in Q4. Our EPS reported includes $166 million of financial results positive, and that mainly reflects a positive impact from the revaluation of certain equity investments. The tax rate on the core business continues to be around 27%. However, the effective tax rate is 24% for 2023, including the tax effect on the revaluation of certain equity investments and also a net deferred tax asset impairment. Therefore, the resulting net income is €3.8 billion with earnings per share reported of €4.80. Now, on the next page, let's look at our US dollar exposure coverage. In the full year 2023, $22.4 billion of forwards matured with the associated EBIT impact and also euro conversions were realized at a blended rate of $1.20 versus $1.22 in the full year 2022. And in 2023, we also implemented $20.2 billion of new coverage at a blended rate of $1.13. So as a result, our total US dollar coverage portfolio in US dollar stands at $91.7 billion with an average blended rate of $1.23 as compared to $93.9 billion at a blended rate of $1.24 at the end of 2022. Our portfolio is currently being adjusted by implementing some rollovers to reflect the delivery target for 2024 and the delivery profile which we expect to be somewhat back-end loaded. Now let's move to the next page for a more detailed look at our free cash flow. Our free cash flow before M&A and customer financing was 4.4 billion euros in 2023. And this reflects, on the one hand, the level of deliveries as well as the commercial momentum across all our businesses, notably in December, resulting in healthy PDP inflows. On the other hand, the execution of our ramp-up translate in a mechanical inventory build-up. And the A400M, let me just remind you, continues to weigh on our free cash flow before M&A. Our full year 2023 CAPEX was 3.1 billion euros, and this reflects the investments in enhancing and upgrading our industrial system. And to support our ramp-up, we expect our CAPEX to continue to increase in 2024, however, at a somewhat lower pace. The free cash flow of 3.9 billion euros includes M&A activities for 65 million euros and customer financing for 436 million euros. And I would say that the aircraft financing environment remains solid with sufficient liquidity in financial markets for products. So in 2023, the customer financing cash outflow was mostly related to the planned execution of certain contractual obligations. And of course, we might see additional usage of cash going forward. As you can see, our net cash position stood at 10.7 billion euros as of the end of December. and our liquidity remains well above 30 billion euros. And this strong net cash position supports our proposal for a special dividend in line with our commitment and further highlights our focus on shareholder return. And with that, I would like to hand it back to Guillaume.