Safran Sa Ord

Welcome to the SAFRAN Third Quarter 2024 Revenue. At this time, I would like to turn the conference over to your hosts, Olivier Andriez, SAFRAN's CEO, and Pascal Bontenay, Group CFO. Mr. Andriez, please go ahead.

Thank you. Good morning, everyone, and thank you for joining us for SAFRAN's Third Quarter 2024 call. I'm here with Pascal. Let us go straight to the key highlights. In the first nine months of 2024, we delivered a strong performance with a 17.4% growth in revenue. This performance was mainly driven by a solid level of services for aircraft equipment and for engines, with civil aftermarket increasing by 26.2% in dollar terms. On the other hand, lead deliveries were up sequentially with 365 deliveries in Q3 2024, but remained below expectation due to supply chain bottlenecks in specific areas that still require improvement. In terms of portfolio management, we completed the acquisition of Tradigence, a leader in artificial intelligence technology, which is now part of Safran Electronics and Defense. Furthermore, we announced the contemplated acquisition of a US-based company, CRT, a world leader in the repair of aircraft engine parts. This move clearly reflects our plans to ramp up our global MRO network and further strengthen our MRO capabilities in America. Despite revised downward expectations for OE deliveries on narrowbody, the strong performance in the first nine months of the year enables us to update our full-year 2024 outlook. We now anticipate revenue around 27.1 billion euros and we raise our EBIT forecast to 4.1 billion euros. The cash guidance is unchanged, but remains subject to payment of customer advances. Turning to slide four, let me give you another view of Safran's Q3 and nine-month sales for 2024. In Q3 2024, Revenue stood at €6.6 billion, an increase of 14% compared to Q3 2023. Level of services remained strong across all activities, with civil aftermarket increasing by 20.5%. OE sales benefited from ramp-up but were limited by supply chain constraints and downward revision in demand. As shown by the revenue increase in the first nine months of the year, the group is continuing on its growth trajectory with a 27.4% growth added, around €3 billion of additional revenue. Turning to slide five. Let me share with you some of our key recent business achievements. Vietjet Air has renewed its commitment for an order of over 400 LEAP-1B engines for its 737 MAX fleet, including additional spare engines. This partnership underscores our continued presence in the dynamic Asian market. In helicopter engines, we continued to build momentum. The Arano 1A helicopter engine was recently certified in China, marking an important milestone for the engine's presence in the civil market. Additionally, in India, Safran, through its joint venture with Hindustan Aeronautics Limited, HAL, has entered into a partnership to develop and produce The Aravali engine, which is a new generation high-power engine for India's new heavy helicopter platform, a 13-ton helicopter. Serbia signed a contract for 12 Rafale fighter jets powered by our M88 engines, which brings M88 orders to more than 1,000 units since the inception of the program. It confirms the Rafale as an essential vector of national sovereignty. ANWA in Korea, who provide the Red Back infantry fighting vehicle to the Australian Defence Forces, has selected our Paseo joint fire solution. This solution will enhance the vehicle's long-range surveillance and target acquisition capabilities. It is another strong example of our defence portfolio relevance in the global market. Let me now hand over to Pascal for more details on Q3 sales.

Thank you, Olivier. Good morning, everyone. Starting with FX, after fluctuating around the 1.12 level during the third quarter, the euro dollar rate has returned below 1.10, which is favorable in the long term for the group. We continue to edge our 2028 exposure, which is now mostly fully completed. For 2024, we confirm a hedge rate of $1.12 per euro, which is one cent better than what we had in 2023. The average spot rate in Q3 24 at 110 was slightly above its level in Q3 23 at 109. This translates into a negative impact on sales nearly 45 million euros. Turning to page 8, as Olivier said, Q3 revenue reached 6.6 billion euros, up 14%. You can see that the scope and currency impact almost offset each other, so the organic growth is 13.8%. This is an incremental 800 million euros of revenue year over year. Half of that is coming from equipment and defense. In the third quarter, OE and services grew at the same pace, meaning 14%. The revenue growth momentum observed in the first half, 19%, slightly slowed down in Q3, with lower than expected deliveries in the narrowbody segment. On slide 9, we provide a few details for activity. Globally in propulsion, revenue reached 3.3 billion euros, up 9.2%. where OE deliveries were flat. We've delivered 365 LEAP engines, a slight improvement from Q2, but still below the expected level. The annual forecast is revised onwards to approximately minus 10%, and this guidance assumes ongoing deliveries to Boeing. It was to some extent offset by additional volume on military engines, especially M88, and helicopter turbine deliveries. On the service side, revenues were up 13.3%, driven by civil aftermarket, up 20.5%, driven as planned by the LPFH contracts growth and to the spare parts growth, both in CFM56 and widebody engines. Specifically on CFM56, shop visit volume was up in line with our full year view. First of August, we had our price escalation in the high single-digit percentage, and the work scope was pretty stable. To a lesser extent, the service growth is also coming from the military aftermarket, both for spare parts and services. Equipment and defense revenue grew to 2.5 billion euros, up 16.3%. OE revenue was up 19%, driven by ramp-up in OE deliveries across key programs, such as the A320neo for Nacelles and electrical systems, 787 for electrical systems, and the G700 of Gulfstream for Nacelles, as well as Avionics. Services were up 12.6%, supported by all activities, and I would say, as usual, notably by the carbon break activities. Aircraft interiors performed strongly, with revenue at 771 million euros, up 28%. OE revenue was up 30%, driven by a remarkable uptick in business class seat deliveries. Almost 600 units were delivered in Q3, continuing on the positive trend from the second quarter, where we shipped 500 units. And it compares to 174 units being delivered last year in Q3. Services revenue was up 25%, largely supported by demand for spare parts for both cabins and seats. And we've seen a strong demand from Asian and Middle East airlines benefiting from the growth of the wide-body market. Turning to page 10, I would like to comment two additional topics. First, we've executed the first range of share buyback of 250 million euros last summer. We repurchased a total of 1.3 million shares. We have since launched a second trench of 500 million euros that we will complete by early December. All shares that will be repurchased during these two trenches will be conserved by year end. At the current share price, it is likely to be in the order of 3.6 million shares, which is about 0.8% of equity. And then the final trench of 250 million euros will be executed in H1 next year. Second, regarding potential new tax measures in France, based on the draft finance bill published early October, we now estimate an additional current tax expense for 2024 in the range of 320 to 340 million euros, which represents 75 cents a share, with a related cash outflow in 2025. We could also be impacted marginally by two other measures introduced into the draft finance bill, First, a new registration fee on share cancellation, and second, the postponement of the abolition of a tax known as CVAE. All this is under review by the French Parliament at this time. Olivier, back to you.

Thank you, Pascal. Based on this strong nine-month performance, we are raising our recurring operating income outlook to around 4.1 billion euros. compared to close to €4 billion previously. On the other side, in light of downward expectations for OE deliveries on narrowbody, we are now targeting €27.1 billion of revenue compared to €27.4 billion previously. The cash forecast is maintained, even though we face some pressure on advance payment and inventories. This revised guidance is based on a couple of underlying assumptions. Leap engine deliveries are now expected to be down 10% in 2024, compared to flat to plus 5% previously, reflecting ongoing supply chain bottlenecks. The group priority remains to best meet customer needs and unlock supply chain constraints. Before we answer your question, let us conclude with a save the date for our Capital Market Day on December the 5th, 2024. We would be delighted to host you either online or in person at our Safran campus near Paris upon pre-registration to share exciting news for the coming years. Our investor relationship team will help you prepare your venue. I thank you for your attention and now Pascal and I will be very pleased to answer your questions.

Thank you. If you would like to ask a question, you'll need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 and 1 again. Thank you. We will now take our first question. This is from the line of Amarik Poulan from Kepler-Shavra. Please go ahead.

Yes, good morning. Thank you for taking my question. On the free cash flow guidance that is unchanged, you say low advances and higher inventories. However, I think you got some advances from the Serbian Rafale order. So is it mostly due to the leap delivery and the effects related to that? And as a follow-up, what would be the impact of a prolonged Boeing strike in terms of this talking effect on Safran's figures earlier next year, for example?

Good morning, Aymeric. This is Pascal. For cash flow, we do maintain our full-year guidance at €3 billion. As we've said back in July, there is still uncertainty around that number. But as we move closer to the 31st of December, there are two months to go now, we are more confident that we can hit that target. The uncertainty we had was about the pre-delivery payments on the LEAP-1B, given the situation at Boeing. Now we feel reassured because Boeing is taking deliveries of all LEAP-1B engines that we ship to them. As you rightly said, we signed the Rafale contract in Serbia, and there was also uncertainty about the payment of the first advance payments. We did receive last week a few tens of millions with respect to that contract. So we have much more certainty today about our cash situation. That's why we are reiterating, confirming our full year guidance.

With respect to the Boeing strike and impact on inventory, the fact is that the Boeing situation in 2024 basically has created a lower demand from their side compared to what we had in mind at the beginning of the year, plus the bottlenecks on the LEAP side globally create a situation where we have a high level of inventory as we speak. Now, for next year, we will be mindful of making sure we soften a little bit the impact on our own supply chain because we need to make sure that our supply chain will be ready to restart and to ramp up once we need. So basically, we want to make sure that we soften a little bit the impact of those shocks on our own supply chain.

And I will add on the cash side, because you were talking about 2025 as well, that there is an additional tax expense in the P&L in 2024, but the cash outflow will be in 2025. So be aware that the 320 to 340 million euros additional tax will be cashed out in 2025.

Okay, thank you.

Thank you. We'll now move to our next question. This is from Ian Douglas Pennant from UBS. Please go ahead.

Thank you very much, Ian, at UBS. Firstly, on your Leap deliveries. So you've got leap deliveries down year over year, but OE sales up. Could you help us square those two against each other, and in particular, the ratio of engines that you're selling as spares and how that has changed over the year, please? And secondly, the supply chain issues that you're talking about in the release and just now with regards to engines, how important is the HPT certification to unlocking those issues. Thank you.

Hello, Yann. On deliveries and spares, we are still at a level which is higher than basically what we have experienced on the CFM56 globally during the life of the CFM56. So basically I would say it's It's double digit, double digit share of the overall lead deliveries, low double digit. So the lead deliveries are down. It is impacting as well our spare engine delivery. As you know, we have to serve two types of clients, our FMS clients, but also our airline clients that want us to ensure that we keep them flying. And so every week, you know, it's a decision of allocation to make sure we serve as best as we can our two types of customers. Supply chain, but still paced, leave delivery still paced by HPT blades, yes, as we discussed in July. The situation is improving. The yield has improved compared to where we were in Q2. So there's an improvement, but which is below what we had expected and what we had needed basically to keep the previous guidance. So that's where we are. We are expecting, as our partner said, in its own communication, we are expecting in the coming weeks a very important event, which is going to be the certification of the new blade. So it's a matter of weeks now. This will help us going forward for sure. This will help us, yes. This will help us. Now, as our partner said, it will be a step. It will not suddenly unlock everything. But it will be a very important step forward.

Thank you.

Thank you. We'll now take our next question. This is from George Zhao from Bernstein. Please go ahead.

Hi. Good morning, everyone. First on guidance, civil aftermarket growth outlook unchanged. We don't have the Q3 profit to get a better sense of the quarterly performance, but what exactly changed between last quarter and now to drive the EBITDA increase? And second, on civil aftermarket growth, so once again, you said that it reflected another strong increase in LEAP RPFH contracts, but unlike the two prior quarters, the 20.5% growth this time around seemed in line with the implied guide. So with the impact from the RPFH on Q3 growth, was that less than the impact on prior quarters? Or ask another way, what was the growth of the CFM 56 and high-threat spares in Q3? Thanks.

Morning, Georges. So as I said, last July from the capital market day and starting in 2025, we'll break down or civil auto market into likely two parts to give you more clarity on the trends on spare part sales, which drive most of the profitability of the group, and services, services being partly on their PFH for the leave, for which we do not recognize any EBIT yet. So I understand that it could be a bit confusing. That's why we provide more clarity. With respect to the first nine months of 2024, I would say that what we see on the spare parts side of the business is in line with our expectations, I would say, in the mid-teens growth, revenue growth, which is part of building blocks are stable work scope, high single-digit growth in pricing, and volume growth. It applies to CFM56. It could even be slightly higher when we speak about wide-body engines. Then on the services, we are seeing much higher growth rates, between 40, 50% more or less, which is triggered by low comparison basis. Last year, we are starting off from very low numbers, so this is why the growth rates are so impressive to some extent. But again, this is not driving any change in profitability.

Thank you.

We'll now take the next question. This is from Olivier Brochu from Redburn Atlantic. Please go ahead.

Yes. Good morning, Olivier, Pascal. Thank you for taking my question. I would have two, if I may, please. I would like to come back on the Boeing topic and ask what the effect on the equipment side could be, and also If I could come back on the LEAP deliveries, you say that you continue delivering engines to Boeing, but you're cutting the guidance quite sharply in volumes. Does it mean that the Q4 numbers will be materially impacted? And second question, ChromoLoy announced some new stuff, an HPT blade for the V2500 from your competition and efforts on the CFM56. Could you discuss the PMA threat on this one in particular, please?

Thank you, Olivier. So Boeing keeps, we keep delivering LEAP engines to Boeing. So Boeing does accept LEAP engine deliveries. But considering the situation, you understand that basically we will deliver less LEAP engines to Boeing than what we had planned at the beginning of the year. So this is part of the overall situation because the demand has been lowered. But we keep delivering LEAP engines to Boeing. On the equipment side, We are on board, let's say, Boeing platform on the 787. We keep delivering landing gear to the 787 because the 787 is not impacted by the strike in Charleston. We are delivering a wiring kit for the Boeing 737 MAX. And yes, indeed, the ship set deliveries have been suspended during the strike. So we expect the strike to basically stop within weeks. As you know, an agreement has not been reached. The vote has been negative this week, but we expect the discussion to restart soon. And we expect that an agreement will, at the end of the day, be found in the coming weeks. So we are prepared to restart delivering our equipment chipsets. On lead deliveries, the minus 10% outlook that we see basically takes into account a sequential improvement in Q4 versus Q3 for sure, but it is taking into account the current supply chain situation on the LEAP and especially the bottlenecks on the HPT blade. PMA, yes, we are well aware of the Chromalloy and Fortress initiative. They have been lagging with their own certification, as you know. Of course, we are mindful of it. But once again, let me highlight that 50% of the fleet is owned by leasing companies. And the leasing companies, they care about the residual value of their engines. And so they don't like PMA. And those PMA initiatives only address a portion of the spare parts. It does not address the LLP, which is basically the most significant part of, the most significant element of our spare parts. So we are following that and we, of course, we have commercial proposal basically to remain attractive to our airline customers in face of those initiatives.

Yes, thank you. Could I ask how many LEAP engines you think Boeing has in excess of its needs at the moment?

We are not communicating on that, but it's okay. It's typically a three-digit number.

Low three-digit number.

It's a three-digit number.

Well, thank you very much for your answers.

Thank you. We'll now take our next question. This is from Chloe Lemary from Jefferies. Please go ahead.

Good morning, Olivier and Pascal. Thank you for taking my question. I have two as well, if I may. The first one is on the timing of payment on the Leap 1B. Could you remind us roughly what's the phasing? What is due when you deliver to Boeing versus when they deliver to airline? Because I think that has changed since the beginning of the program. The second one is on seats. So business class seats were up massively in the quarter. So could you share with us what helped you achieve this, whether it was certification of some model achieved, and given that we've seen pretty limited wide-body deliveries in Q3, whether this was largely retrofits? Thank you.

Good morning, Chloé. On your question about payments from Boeing on the LEAP-1B, we do receive a share of prepayments received by Boeing from the airline. a long time before we start delivering the engine. So CFM does receive a fixed portion of the advance payment Boeing is receiving. And then at delivery of the engine, we do receive the complement in pricing. So we have the full cash impact when we deliver the engine, not when Boeing is delivering the aircraft.

Basically, we are today in a period where we deliver shipsets of business class seats that have been certified earlier, either end of last year or beginning of this year. So we are in this phase of production, if you wish. have ahead of us seats to be certified, but we have entered in a more significant period of production. And we are delivering both for line fit and retrofit. Indeed, we have two demands. The line fit demand and following the ramp-up of the wide-body aircraft, both on the A350 from Airbus and the 787 from Boeing, A330 NAOs as well. And also there's a significant demand on the retrofit side. Typically, because the wide-body deliveries overall have lagged a bit versus airline expectation, some airlines have decided basically to retrofit their current wide-body aircraft. And so we have to serve that demand as well. So it's a significant pickup, but as expected, it's a significant pickup of business class seats deliveries this year compared to last year.

Very clear. Thank you. Thank you. We'll take our next question. This is from Ken Herbert from RBC. Please go ahead.

Yes, hi. Good morning.

Morning.

Morning, Ken. Two questions, if I could. First, can you comment on how many of the new HPT blades you potentially have in inventory that could be ready to ship when you get certification there? And then my second question is on CFM56 pricing, have you seen any change in airline acceptance or pushback on the high single-digit price increase on CFM56 material, maybe more this year relative to prior years, or has there been any inflection in your airline customers' acceptance of the pricing on the CFM56 spare parts? Thank you.

Okay. There's certainly an inventory of new HPT blades, as you know, We are expecting the certification of this new HPT blade within the next weeks. And so as soon as these blades are going to be certified, we'll be ready to ship, let's say, some of them, especially for the MRO market. I will not quantify. I will not quantify. But yes, there's new HPT blades already available. On the CFM56 pricing, as you know, we are mindful of making sure that our price increase remains acceptable to the market. We know there's a very significant demand for spare parts. as the level of retirement of old aircraft retirement has been low, basically the used market, the used part market has not been fed, and so there's not many used parts available today in the market. So this provides a good momentum for new spare parts, but we are mindful of basically making sure that those price increases remain rational, if you wish. So we have not seen any pullback today.

Thank you.

Thank you. We'll now take our next question. This is from Ben Healan from Bank of America. Please go ahead.

Hey, good morning, guys. I hope you're both well. The first question I had was on the supply chain situation right now across equipment and on the interior side. So if you look at the A320neo landing gear deliveries, they were down a little bit in the quarter. Is there anything just generally across those two divisions that is particularly holding things up right now or particularly a significant bottleneck that we need to be thinking about? And then the second question, you kind of touched on it, Olivier, about supply chain and managing the supply chain through LEAP, but I think in the past you'd kind of highlighted that you were in a position to deliver roughly 2,000 shipsets on the low-pressure modules for the LEAP this year. That supply chain has actually been performing relatively well. As you roll forwards over the next 6, 12, 18 months, Are you keeping the supply chain at a relatively elevated level on LEAP so that there's some ramp-up in 2025 and 2026? Or is there going to be some risk of destocking over the next 12, 18 months that could also put some pressure on that supply chain there? Thank you.

Thank you, Ben. A lot of questions. The supply chain is progressively... the supply chain situation is progressively improving. But not to a point where basically I can affirm that the supply chain issues are going to be completely behind us in 2025. But it is progressively improving. The number of critical situation and what we call black situation is decreasing today as we speak. we still have about 20 suppliers that we follow very carefully that are critical, if you wish, for our overall performance across the board on engines and aircraft equipment interiors. About 20 suppliers, critical suppliers that we follow very, very tightly. So that's one. And we are, as I already mentioned previously, We've been reinforcing our supply chain management team, doubling up the number of our supply chain managers, you know, deploying tools and what we call our One Safran Operating Excellence methodology to help our suppliers move forward. So that's one. You mentioned the lending gear, and yes, indeed, I had mentioned the landing gear situation as a tough one, especially for the A330, not the A320, but the A330neo in the first half of this year. We are back on track. And so basically on the A330neo, now we are delivering on RAID 4 as expected by our customers. We've not been pacing on lending here on both A320 and A350, but once again, we are following very carefully our overall supply chain there. We will end up this year with a high level of inventory, for sure, for two reasons. The first reason is the consequence of the Boeing situation because basically even if we continue to deliver LEAP engines, basically we've delivered less LEAP engines than what we expected at the beginning of the year, just because they don't need them. But we are still delivering, as I said. And also because of the overall leap situation and the bottleneck on the HPT blade. So yes, indeed, we have a high level of inventory on the low pressure side of the leap. So we could theoretically take the decision to basically decrease our inventory next year, but that would impact badly our suppliers. So basically, we have decided to soften the impact vis-à-vis our own supply chain because we want to make sure that our suppliers will continue to accompany us for the ramp-up because the ramp-up will be there. It will be there for both Airbus And it will restart on the Boeing side as well. So we need to be careful vis-a-vis our own supply chain and want to make sure to soften a little bit the impact in order to keep them aboard and running. So we are going to try to basically manage our inventory next year. Of course, with the view to decrease the rotation, as we say, in terms of inventory in terms of days of revenues. So we want to make sure that we are going to manage and decrease our rotation indicator. But in absolute terms, we will make sure to soften a little bit the impact on our own supply chain. We have our own responsibility with this supply chain.

That's very clear, Olivier. Thank you. Just a quick follow-up on the interior side. Like Clary mentioned, the business class seats have seen a very significant increase in the last couple of quarters. If you think about series deliveries and economy seats and areas like that, do you feel that they are potentially gating items to deliveries at the OEMs at the moment?

No, we have not noticed any... You know, black points on the economy seats at this point.

We are experiencing a significant ramp up at the moment on both business class seats and economy seats. No specific black points. Now, I have to also say that certification remains a challenge. Not only for us, but for the overall aircraft interiors providers and seat providers as the certification authorities have decided to tighten their criteria. So it remains a challenge, the certification.

Very clear. Thank you both.

Thank you. We'll now take our next question. This is from Christoph Menard from Deutsche Bank. Please go ahead.

Yes, thank you for taking my question. A follow-up on the seed situation. I mean, we heard from OEMs that seed suppliers can be a pacing item basically to deliveries. Given the surge in deliveries that we've seen in the year, Would you consider yourself still as a pacing item? I think it was a little bit the question before, but I just wanted to make it clear. The second question was on FX. When do you think you will be able to narrow the range of edging next year and the year after? You're still in 112 to 114. And the last question is on the portfolio adjustments. I understand that you may be looking at disposing of Roxo or your stake in Roxo while looking at CRT in the U.S. Can you give us a little bit more details on that CRT acquisition, the strategy you have behind it, and is it part of your bigger MRO plan, basically, in terms of developing your offering?

Thank you. So, Christophe, As you've seen from our members, we are at the moment in a significant search of deliveries of business class seats and economy class seats, especially also for line seats and wide-body aircraft. So yes, it is one of the potential pacing items for wide-body deliveries. It's still a challenge ahead of us for the weeks to come. And so we are putting in place all the resources to make sure we deliver on time our ship set to the , but also we are providing what we call on-site support to the final assembly line to make sure that we fully support our OEM customers before the end-over to their own customers. So it's a race for the weeks to come. And we've been putting in place all the necessary resources to be by our customer's side and make sure we will not impact their own deliveries. But it's a challenge. It's a race, yes. Portfolio. portfolio management. So Roxelle, we have signed an agreement to sell our 50% share of Roxelle to MBDA. MBDA is by large the main customer of Roxelle, by large. And so it is making sense for us that we sell our share to them. And basically we've We've got to an agreement with an adequate price for this share. So we expect this deal to be closed by the end of this year. Now, what is the rationale behind the CRT acquisition? CRT is a recognized, let's say, provider of repair solution. repair engine solution, especially on casing. So there are suppliers of us for the CFM56. There will be a supplier for LEAP as well. They are doing repairs also for high-thrust engines. And so they are recognized as to be one of the best experienced company for those repairs. As you know, we are today in a race as well to significantly ramp up our MRO capabilities and get prepared for this huge need that we will have for LEAP. There's going to be a significant number of shop visits for the LEAP. We see today the surge of LEAP shop visits, and so we have decided to invest more than 1 billion euros to increase our MRO capabilities, not only for the engine maintenance, but we have also decided to be a strong player in the repair capabilities. So it's both sides, if you wish, engine maintenance, shops. So we've taken the decision to basically to build new shops and to extend our existing shops. You may know that we have already communicated on India, a new shop in India, an extension of our shop in Mexico, and we are going also to soon announce, let's say, very soon, a next decision on this one. But repair as well. And so it makes complete sense for us, basically, to get into... the casing repair, it's a significant part of the repair solution for the acquisition of CRT. And we have decided also to be present in the three main geographical areas, the Americas, Europe, and Asia.

On your last question, Christophe, morning. As we usually do, we provide a midterm guidance at the next capital market day. And FX is one of the underlying assumptions. So we provide a crystal clear assumption about our FX edge rate going forward.

Thank you. Thank you, Archoy.

Thank you very much.

Thank you. We'll now take our next question. This is from David Perry from JP Morgan. Please go ahead.

Yes. Good morning, Pascal and Olivia. Can I ask two questions, please? The first, could you just give us a bit more color on M&A? So any details you can share on CRT in terms of its sales and EBIT and also an update on Collins and the timing of that deal, if you think it's going to close. And then the second question is a bit more conceptual. And I know you won't want to say too much ahead of the CMD, but I just want to think about LEAP aftermarket margins going into that event. And I just want to ask you, would you agree that your accounting just seems very conservative compared to your peers, not just GE, but all the other engine companies? And is there any particular reason for that? Is it purely your choice? I'd just be interested in any conceptual comments you may be willing to share on that. Thank you.

Morning, David.

Hello, David. I will start with the first one. CRT, it's about 500 people. If I remember correctly, it's, I think, around 200 million of turnover around. Both, you know, it's mainly aircraft engines, mainly aircraft engines. So customers are CFM. CFM 56 and LEAP and GE is also one of the customer for the CRT for the high thrust engines. On Collins, we are filed on the CCU side and the change of ownership side with the relevant authorities. We fixed the situation in Italy, as you know, earlier this year. And we are getting prepared. Hopefully, we plan to file for the antitrust side. We are prepared to file by the end of this year, hopefully. So today, as we speak, we expect, let's say, a closing to occur by, let's say, H1 2025, I would say. As you know, on the antitrust side, basically we need to fix some potential issues on the antitrust side, and this is what we are doing today. This is where we are focusing today. So we want to make sure that once we file, basically we have answered and found responses to all the potential questions of the antitrust authorities. And so this is where we are focusing today.

David, on your second question, as you know, the Liebherr PFH contracts are CFM services contracts, meaning within the CFM agreement, 50-50, GE and Safran. This is why the margin at completion of all our book of contracts is the same, either at GE or Safran. You won't see more profits than any other contract. it would be the same profits at the end of the day. The main difference it seems to be the way we will account for profits going forward. So we know it would be the central theme of the next capital market day. I would not say that we are very conservative, but given the maturity of the engine, the fact that we are introducing in 2025 the new HPT blade that is aiming to more than double the time on wing on for leap 1a and then in 2026 for the leap 1b we are still in the early days of that engine we believe on our side it is cautious to maintain some contingency going forward not too much contingency that is why very conservative seems a bit you know uh not the right wording to me, but we want to keep some contingencies that we will release over time. But at the end of the day, we will have exactly the same profit, dollar profit, than our partner, because it is a CFM service contract. Yeah, please go ahead.

If I can just probe a bit more around it. MTU has sent an agenda out for their CMD, and it says that they're going to guide all the way through to 2030, which is longer than we normally see from companies, but kind of makes sense to me, given the longevity of programs. I just wonder how you're thinking about framing your CMD. I mean, it sounds to me from the way you're recognizing margin, your comment just now on the LEAP 1B, new blade kicking in from 26, that maybe we're not going to see the full LEAP benefits if you guide 27 or 28? I mean, is there a framework for how you're going to guide? Are you going to also extend the envelope just so that we can kind of prepare our expectations?

Yeah, so what we will do is to provide guidance for 2028. This is exactly what we've done in the previous CMDs. So the financial guidance will be 2028. And then, as you rightly said, most of the profits that are embedded into our LEAP RPFH contracts will come after 2030. So this is why we will provide also some indication on 2030 and likely 2040 to give you a sense of, you know, how big is the opportunity for the LEAP RPFH compared to what we had historically on CFM56 because we are clearly very excited about the LEAP RPFH and globally LEAP aftermarket business. So we need to give you a long-term view to discuss with you what is the shape of profits and opportunities going forward. So I guess it is a bit compared to MTU.

I look forward to it. Thank you for that.

Thank you.

Thank you. We'll now take our next question. This is from Hervé Trouet from CIC Market Solutions. Please go ahead.

Yes, good morning, Olivier and Pascal. Quite a lot of questions have been already answered. I will take two. The first one will be on tax. Just want you to confirm firstly if there will be as well an estimation on the tax to be taken on the 2025 numbers. And will it be half of what you guided of these around $322 to $340 million. So are you expecting half as well to be booked in 2025? And also on the tax side, do you expect any impact from your share buyback? I think you still have €725 million to be done. Are there going to be potential attacks on that with the new financial law that can impact you? And would it be just marginal or could it be meaningful for you? And the second question is again on leap and also profitability. At the moment, do you book any profit for the OEM leap or is it booked as a loss? And if it is at a loss, out of your increase of the guidance in the EBIT of 100 million, how much is coming from your reduction of delivering of leap if it is at a loss? Thank you.

Morning, Hervé. On the tax side, on corporate tax, yes, indeed, it seems to be temporary over two years. So as I said, a 41.2% surtax applied in 2024 with a cash outflow in 2025. And then half of that, so the surtax should be 20.6% applied in 2025, being cashed out in 2026. So it's a bit early, but I would I have a guesstimate of nearly 500 million euros for both years, a bit more than 300 in the first year and the remaining in 2026. But it's, I guess, a rough estimate that I can make. Then it is true that there will be a registration fee applicable to certain capital reductions, clearly applying this registration fee to the reduction of share capital coming from repurchase share that we will cancel. It is deemed to be less than 1% of the total repurchase amount. So we are expecting to repurchase 750 million euros of shares this year. We will cancel these shares by year end. So the tax we are prepared to pay is a couple of millions, I would say. Then on LEAP, as you rightly say, we book a loss for all LEAP OE deliveries. So part of the guidance upgrade is definitely coming from less LEAP engines being delivered.

Yes. Could you give us a percentage of these?

No.

No, no, no.

OK.

OK.

Thank you very much. The point to highlight is with the combination of the, on the LEAP OE side, globally breakeven because of the combination of the installed engine that we deliver to the airframers on which we have a loss and the spare engine that we deliver to the airlines where we make a profit. So the overall balance is breakeven.

Okay, I understand.

Thanks, that's very clear. We'll take the last question.

Thank you. Our last question is from Olivier Brochet from Redburn Atlantic. Please go ahead.

Yes, thanks. I just had a quick follow-up on the HPT blade. Is the certification dependent on what is happening at Boeing in terms of the strike?

Bonjour, Olivier. No, not at all. The certification that you are expecting in the weeks to come is relating to the LEAP 1A. So we expect the certification of the new blades for the Leap 1A at the end of this year. And we expect the certification of the Leap 1B for Boeing at the end of next year. And yes, we will need Boeing support for that. But this is planned for the end of next year, end of 2020. OK, perfect. Thank you. Thank you.

Thank you all. I'm looking forward to seeing you at the Capital Market Day, especially David.

Bye, guys. Have a good day. Thank you.

Thank you. This concludes today's conference call. Thank you for participating and you may now disconnect.