Safran Sa Unspon/ Adr

Welcome to the SAFRAN first quarter 2024 revenue. At this time, I would like to turn the conference over to your hosts, Olivier Andries, SAFRAN CEO, and Pascal Bontenis, Group CFO. Mr. Andries, please go ahead.

Good morning, everyone. Thank you for joining us to SAFRAN's first quarter 2024 call. I am here with Pascal. So let's go straight to the key highlights for the quarter. The air traffic good dynamics continues. Narrow body air traffic ended the quarter at 113% of 2019 level. Wide body at 94%. We expect wide body air traffic to fully recover by the end of this year. These good trends support the positive momentum in original equipment and services across all our businesses. We enter 2024 with a soft aircraft production level, with production rates expected to increase going forward. We post today solid revenue growth in Q1 2024 in line with our full year guidance. This performance was mainly driven by services with notably civil aftermarket up by 27.3%, and also by original equipment deliveries in equipment and defense. We closed the acquisition of air liquid, aeronautical oxygen, and nitrogen activities in February. We remain focused on meeting our customer commitments, mitigating short-term challenges on volumes, and are confident in our ability to deliver our 2024 guidance. Turning to slide four, let me give you an overview of Safran's Q1 sales for 2024. Revenue is up 18% at €6.2 billion. We enjoy the double-digit revenue growth in all divisions. Services perform well across the board, and in particular in civil aftermarket, which grew by 27% year-on-year in U.S. dollars and by 12% compared to Q4 2023. This growth was mostly driven by long-term service agreements for both CFM56 and BLEEP and is consistent with our full year guidance at 20% growth. performance was mainly driven by equipment and defense on a low comparison basis. Lead deliveries were flattish year on year, reflecting a soft start of aircraft production. Taking into account this operating environment, we revised our lead delivery forecast from plus 20 to 25% growth to plus 10 to 15% for 2024. Turning to slide five, business highlights. Some of our main business successes since we last spoke in February. On civil engines, CFM signed a service agreement with American Airlines on more than 400 Leap 1B, and the Chinese aircraft leasing company Calc placed an order for 40 LEAP 1A. With respect to LEAP durability, CFM has shipped the first LEAP 1A outfitted with its new reverse bleed system to Airbus. In helicopter engine business, we enjoyed a strong commercial momentum. We signed a support by the hour contract for 50 IL-2E with ADAC, It is a service which supports leading actors in helicopter rescue and medical transport in Germany and Netherlands. We won a new contract with the UK MOD to continue to support the RTM 322 engines powering the Royal Navy fleet of Merlin's helicopter for a further six years. And we have renewed our contract with the US Coast Guard to support more than 240 Arian Engines and Bristow Group selected Aria's 2B2 engines and supported by their contract for their new H-135 fleet. In military engines, Safran and Qatar Armed Forces signed a support agreement for the M-88 engines, powering their fleet of 36 Rafale. In our equipment business, we continue to sign several service agreements across all our activities. notably electrical harnesses with Malaysia Airlines, Berard, Nacelle with Cebu Pacific and Flyadil. Let me now hand over to Pascal for more details on Q1 sales.

Thank you, Olivier. Good morning, everyone. Starting as usual with FX, the USD remains strong in the quarter given the geopolitical context and interest rates expectations. Currency volatility is also on the rise. These two trends provide a favorable FX environment for Safran when it comes to edging heat exposure. So for 2024, we do confirm our edge rate target of $1.12 per euro, which is one cent improvement compared to last year. Specifically in Q1 2024, the average spot rate of 109 compares less favorably to Q1 2023, resulting in a negative impact on sales of about 50 million euros. Turning to page 8, Q1 revenues stood at 6.22 billion euros, a solid 19% organic growth, or 18% when taking into account the negative translation impact from the USD. Also, the net impact in revenue is neutral at group level. Change in scope reflects the divestment of cargo and catering activities from Safran Cabin last May. and the acquisition of Thales electrical system in October 2023 within equipment and defense. On slide nine, let me provide a few details per activity. Propulsion revenues stood at 3.1 billion euros, up 15% organic. OE revenue was up 10%. As Olivier already said, LEAP volumes were flat year over year at 367 units. reflecting the soft start of the year of aircraft production. In the same vein, helicopter engines and military engines had a soft start as well, as expected. Revenue growth was mainly driven by favorable pricing and mix, and positive volume growth in wide-body engines, plus 50% year over year. Service revenue was up 19% organic, mainly driven by civil aftermarket. Let me clarify the drivers behind the 27.3% gross performance. The sales coming from either CFM56 or G90 spare parts came in line with expectations, meaning positive volume growth and pricing, but no change in work scope. This significant performance is all attributable to CFM long-term service agreements. We did experience additional costs in some contracts, leading to additional revenue, as we recognize revenues as a cost incurred. So this is a phasing effect that will reverse as soon as Q2. And as you all know, Safran does not recognize any profits yet on these contracts. So on a full year basis, the Q1 performance has no impact on our full year guidance of plus 20%. Outside, civil engine services were slightly up in helicopter and military engines. On equipment and defense, revenues stood at 2.4 billion euros, up 23% organic. This is a much better growth than in proportion, as it faces a weaker comparative. OE revenue was up 27% organic, benefiting from a strong ramp-up in deliveries and narrowbody and widebody programs for landing gear, power and wiring activities, and nacelles. Services were up 17% on all activities, notably carbon breaks, ,, lending year spares, and MRO. Electronics and defense activities were strongly up in the quarter, led by higher deliveries in organics, guidance systems, and electronics activities. On aircraft interiors, revenues stood at 676 million euros, up 24% organic, which is still below the 2019 level for Q1. OE revenue was up 17%. Most of the increase came from custom cabin and galleys for A320. As you will have noticed, business class seat deliveries were down by 82 units, mainly due to continued delays in certification of some programs. But customer demand pushed out as well, as airlines expect to take deliveries of new airplanes later than expected, and some supply chain constraints. Services revenue was up 39%, a strong performance with good customer demand for spare parts in both seats and cabins. Olivier, back to you.