Safran Sa Unspon/ Adr

Welcome to the SAFRAN full year 2024 results. At this time, I would like to turn the conference over to your hosts, Olivier Andries, SAFRAN's CEO, and Pascal Bontenis, Group CFO. Mr. Andries, please go ahead.

Good morning, everyone, and thank you for joining us to our full year 2024 earnings call. I'm here with Pascal. Starting with our key highlights. 2024 has been a landmark year for Safran, with revenues, profits and cash flows reaching record levels. These achievements were underpinned by strong aftermarket activity across the board, with notably civil aftermarket activity growing by 25% in dollar terms. supported among other things by the more than 10,000 aircraft in service powered by a second generation CFM56. Our focus on operational excellence continues to deliver results. We improved our operating margin by 150 basis points year over year. And we are pleased to see Safran Seats reaching operating break-even. marking another milestone in our turnaround efforts for aircraft interiors. In terms of OE deliveries, lift volumes were down 10%, reflecting supply chain constraints. Equipment and defense and aircraft interiors businesses saw an increase in OE volumes, benefiting from strong customer demand. On mergers and acquisition, we have just completed the acquisition of C RT, a U.S. MRO leader. At the end of December, we have divested our 50% share of Roxel to MBDA and signed an agreement with Woodward for the sale of our U.S. electromechanical actuation activities. The closing of Woodward deal is subject to the concomitant completion of Collins Actuation and Flight Control Activities Acquisition expected at the end of H1 2025. Looking ahead to 2025, we are confident to deliver another year of substantial revenue and profit growth. Turning to slide four, let me give you an overview of Safran's remarkable financial performance in 2024. Revenue grew by 18% at 27 Each of our divisions contributed to this strong growth, reflecting robust demand and our ability to execute in a volatile environment. Recurring operating profit is up 30% at €4.1 billion. Recurring operating margin expanded by 150 basis points, reaching 15.1%, reflecting strong business activity and illustrating our focus on operational excellence. Free cash flow was €3.2 billion, which is a standout performance considering pressure on working capital. Based on this good set of results, And as per our dividend practice to distribute 40% of our net result, we are proposing a 2.990 euro dividend per share for 2024, up 32% compared to last year, returning 1.2 billion euro to our shareholders and reflecting our confidence in the future. Turning to slide five, commercial momentum has continued in the recent weeks across Safran key businesses. In December, CFM achieved a significant milestone for the LEAP 1A engine with FAA and EASA certification of the new high pressure turbine durability kit. This enhancement extends time on wing. and durability, particularly in challenging hot and dusty environments. This is a trigger to start recognizing profit on Leap 1A RPFH contract. We celebrated the first commercial flight of the Leap 1A powered Airbus A321 Extra Long Range with Iberia. marking a milestone in long-range single-ail aviation. We are very proud of the full-fledged certification by EASA for our Engineus 100, a world premiere for an airworthy electric motor to power an aircraft. This is paving the way for extended application of electrical machines in general aviation and VTOL, for mission-critical functions with the highest standards of flight safety rules. Moving to our expanding defense business. In the US, we have launched Safran Defense and Space Inc. to expand our footprint, for instance, in Bedford for electro-optics, in Denver for small satellite propulsion, and in Rochester for the positioning, navigation, and timing systems. We secured new contracts with the Bundeswehr in Germany to supply advanced infrared binoculars and with the Egyptian Navy to provide optronics and navigation systems. Each of these achievements demonstrates Safran's ability to drive innovation, support our customers, and deliver value in an increasingly competitive global market. Now on slide six, sustainability. An update on our climate strategy roadmap achievements. In 2024, we devoted nearly 700 million euros in self-funded research and technology of which 88% was dedicated to environmental efficiency. In addition to the NGIN-EU certification, we have made several other key progress in our technological roadmap, reinforcing our leadership in sustainable aviation. We conducted ground tests of the first liquid hydrogen-fueled turbine engine. for light aviation with our partner Turbotech and Air Liquide. We completed the Ecopulse flight test campaign with Daher and Airbus, demonstrating the potential of distributed hybrid electric propulsion. We inaugurated Bicova in Belgium, which is a unique compressor test center designed to validate the next-gen aircraft engine innovations. We remain fully committed to reducing our carbon footprint and driving sustainable transformation across our operations. Our EcoVadis rating increased to 65 out of 100, reflecting ongoing improvement in ESG performance. We are on track to meet our 2025 and 2030 scope one and two CO2 reduction targets aligned with the Paris Agreement. We hosted our third supplier day, engaging our top 400 suppliers in our sustainability journey. To further drive our sustainability agenda, we continue to integrate sustainability into our governance and operations. I will now hand over to Pascal for more details on our 2024 results.

Thank you, Olivier. Good morning, everyone. I'll be commenting on the adjusted accounts for which a bridge from the consolidated statements is presented on page 8. As usual, the adjustments relate to FX or PPA. The 4.7 billion euros change in mark-to-market of instruments edging future cash flows has been recorded in financial income in 2024. This is purely an accounting entry with no cash impact. FX trends are illustrated on slide nine. We continue to actively manage our currency exposure and secure favorable rates in a strong USD environment. In 2024, the Euro-USD rate fluctuated around 108 all year with a drop at 104 at year end which explains the mark-to-market from the previous statement. We achieved a hedge rate of 1.12, an improvement of one cent compared to 2023. For 2025 and the following years, our hedge rate is set at 1.12, same as in 2024. By convention, the annual estimated net exposure is capped at $14 billion, and this should not be interpreted as a medium-term business forecast. Our hedge book stands at $44.7 billion, ensuring long-term visibility and predictability for operations. On the income statements, one of items amounted to 6 million euros, including capital gain from the Roxhill divestment of 83 million euros. In financial incomes, the return on cash investments exceeded the cost of debt and generated 157 million euros in net financial interest. Additionally, FX revaluation of some positions on the balance sheet had a negative impact of 106 million euros. The apparent tax rate is 23.8%. Since the French draft finance bill was not adopted by year end 2024, there was no corporate surtax applicable that year. According to the latest news in France, 2025 should be the one and only year when the surtax applies. Net income attributable to the parent stands at 3.1 billion euros, representing 7.37 euros per share, up 52% from last year. On slide 11, as Olivier said, 2024 revenue reached 27.3 billion euros, up 17.8%. It's 17.1% organic growth with very consistent growth rate each quarter of the year. Original equipment sales were up 17.2%, driven by volume, customer mix, and price. Service revenues were up 17%, benefiting from strong demand from airlines for MRO and spare parts. Then we had a slight impact from the scope, a modest impact of 0.6%, reflecting the M&A activity in terms of divestments and acquisition of different businesses. Recurring operating income was €4,119,000,000, up by nearly a billion euros in one year. It is up 27% organically, reflecting robust execution across our businesses. Margins expanded by 150 basis points to 15.1% of sales. demonstrating the margin acceleration that we discussed during the capital market day back in December 21. Key drivers of this performance include price and volume effects in OE and MRO, positive mix for civil engines, and operational excellence with sustained cost discipline and efficiency gains of setting inflationary pressures. While R&D investments increased by 160 million euros, Their EBIT impact remains stable as a percentage of sales. It was 4.1% in 2024, which compares to 4.3% of sales in 2023. Let's now take a closer look at our businesses, starting with propulsion. Revenue hit 13.7 billion euros, up 15%. OE revenue grew by 13.5%, with 1,407 leap engine deliveries, down 10%, impacted by supply chain constraints. The lower volume was more than made up for by a better customer mix and pricing. Helicopter turbine engine deliveries increased by 94 units, totaling 682 deliveries. M88 fighter engine deliveries remained stable with 40 units, comparing to 42 in 2023, I would say as expected. and it did benefit from a favorable customer mix. Propulsion services revenue was up 16%, driven by a 24.9% growth in civil aftermarket in dollars, in line with our guidance. Our new spare parts indicator is up 17% in dollars, thanks to more show visits and higher prices for both CFM56 and IceRust engines. Our new services indicator is up 38% in dollars, led by LEAP RPFH contracts, as you know, with no margin recognition in 2024, and ice rust engines. Helicopter turbines and military engines also help boost the growth of propulsion services. Recurring operating income was 2.8 billion euros, up 18%, margin reach 20.6%, up alpha point compared to 2023, supported by the good dynamic in aftermarket for CFM56 and favorable customer mix and pricing. Equipment and defense sales reached €10.2 billion, up 17.7%. Original equipment revenue was up 18.3%, driven by higher volumes of Nacelles on the A320neos and the GE Gulfstream 700. more electrical system for the 787 and the A320neo, as well as increased defense sales on guidance systems, optronics, and land systems. Service revenue was up 16.8%, with a strong recovery across the board. Recurring operating income reached 1.3 billion euros, up 31%, with an operating margin at 12.2%, at 100 basis points compared to 2023, which was our commitment. This was expected thanks to the OE ramp-up, strong services, better pricing, and a relentless focus on operational excellence, which helped us offset the impact of inflation. Finally, on aircraft interiors, we can share some great news. That division is now back to the black. Sales were €3 billion, up 25.2%, showing very strong growth, but this is still 5% below the record levels of 2019. OE was up 24.5%, with strong growth in cabin activities, like custom cabins, A350 lavatories, A320 galleys. In the seat business, we delivered nearly 2,500 business class seats to major airlines worldwide, making significant progress in our industrial and engineering processes. Services were up 23.6%, benefiting from strong growth in both seats and cabin, mainly in spare parts. So we've made progress in turning around aircraft interiors. After breaking even in full year 2023 for cabin, cabin and IFE are now positively contributing to recurring operating income, and seats as rich operating breakeven for full year 2024. In the second half of the year, aircraft interiors was even at breakeven in terms of free cash flow generation. As a result, the division posted a positive recurring operating income of 27 million euros. On slide 16, free cash flow exceeded our expectations at 3.2 billion euros. This is an increase of nearly 250 million euros compared to 23, demonstrating the efficiency of our cash management. This performance comes from a 31% increase in EBITDA and stable working capital needs thanks to higher customer advance payments and deferred income, which have set the rise in inventory in euro terms. We also continue to invest in new production capabilities, especially in engine MRO, as well as in low-carbon projects. Safran was net cash positive at the end of 2024 with a positive balance of €1.7 billion, which represents minus 0.3 times EBITDA. Besides the free cash flow, we paid a dividend of €2.2 per share and repurchased shares for €1.3 billion. We also proceeded with the early redemption of the OCEAN 2027 convertible bond using shares purchased in 2022 and 2023. And we had a net cash out impact from our M&A activities of nearly 300 million euros. So we remain fully delivered and we enjoy a strong balance sheet. Switching to shareholder returns on slide 18. For the fiscal year 2024, Safran will propose a dividend of 2.9 euros per share, up 32%, representing a 40% payout ratio on the adjusted net income. On share repurchase programs, in 2024, we repurchased 6.5 million shares for a total of 1.3 billion euros, including the 750 million euros in share buybacks, resulting in the cancellation of 3.6 million shares, which add an accretive impact of 0.86% on the equity ownership. We also completed the edging of the potential deletion of the 2028 OCEAN convertible bonds. And early this year in 2025, we started the execution of our 5 billion program for share consolation with the first tranche of 350 million euros. All shares purchased under this program in 2025 will be conserved by December 31st. Olivier, back to you.