Safran Sa Unspon/ Adr

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.