Safran Sa Unspon/ Adr

Welcome to the Saffron Third Quarter 2025 Revenue. At this time, I would like to turn the conference over to your hosts, Olivier Andries, Saffron's CEO, and Pascal Bontenay, Group CFO. Mr. Andries, please go ahead.

Good morning, everyone. Thank you for joining us for Saffron's Third Quarter 2025 call. I'm here with Pascal. Let us start with the key highlights. On the quarter, Safran delivered another strong performance in Q3, with IT growth driven by increased volume and services. Adjusted sales reached 7.9 billion euros. Civil aftermarket remained robust, reflecting continued demand from airlines. Spare parts for civil engines were up 16%, largely thanks to CFM56, while services grew by 24%, supported by LEAP contract. Regarding LEAP engine deliveries, output has improved quarter after quarter this year. After a slow start, we have been able to catch up on delays, and in Q3, We reached a new record with over 500 LEAP engines delivered, up 40% year-on-year and 25% from the previous quarter. Over the first nine months of the year, we have delivered a total of 1,240 LEAP engines, a 21% increase compared to last year. These strong results also reflect continued improvements across our supply chain. In addition to these strong operational results, we are excited about our recent acquisition of the actuation of flight control activities from Collins, finalized at the end of July. The strategic move has already contributed to our Q3 performance. Integration is off to a great start. Our teams are fully engaged and focused on unlocking cost synergies and new commercial opportunities. We are confident that this acquisition will be a strong driver for Safran's future performance. Looking at the year-to-date picture, adjusted revenue for the first nine months amounted to €22.6 billion, up 15% organically, confirming a strong growth trajectory across all divisions. Based on this performance, we are upgrading our full-year 2025 outlook on all metrics. Turning to slide 4, let me highlight some of our key business achievements this quarter. Last week in Morocco, we brought ground on a new LIP MRO facility and announced the launch of a new LIP 1D assembly line in Casablanca. This expansion strengthens our global industrial footprint and will support the sustained ramp-up of the LIP engine deliveries in the years ahead. with a capacity to assemble up to 350 engines per year. In defense, Safra and RideMetal signed a framework agreement to jointly develop advanced defense solutions, combining our expertise in electronics, navigation system environments, and atomic clocks, time servers, with RideMetal's land defense capabilities. At the 2025 Defense and Security Equipment International Show in London, SAFRAN unveiled its next-generation Diffra-Ren binoculars, setting new standards for tactical observation, situation awareness. Lastly, in Poland, SAFRAN and PGZ entered in a strategic defense partnership to foster local industrial cooperation and innovation. The agreement covers industrial cooperation of the Faber Precision Munition, and the local production of geodicts navigation system with PGZ. Let me now hand over to Pascal for more details on Q3 sales.

Thank you, Olivier. Good morning all. A few words to start with on the FX as usual. After a sharp rise in the first part of the year, the Eurodollar stabilized around 1.15 to 1.17 since early July. Our hedging portfolio has remained fully protected so far. with no deactivations to date. The team is continuing to edge our 2029 exposure at very good rates. Our 2025 edge rate is confirmed at $1.12 per euro, and the edge book now totals $54 billion as of end September, unchanged from the end of June. Overall, our approach to FX risk has kept us well protected, ensuring attractive edge rates and supporting South France competitiveness in a challenging market environment. Turning to slide 7, Q3 revenue reached €7.9 billion, up 18% year-over-year. The currency impact was a negative €300 million, mainly reflecting the euro appreciation against the US dollar, with an average spot rate of 1.17 in Q3 compared to 1.10 last year. The COPES largely offset the negative currency impact, contributing €300 million. primarily driven by two-month consolidation of the actuation and flight control activities acquired from Collins. In total, the group generated over €1.2 billion in additional organic revenue versus last year, fueled by growth in every division, with propulsion leading the way. And on slide 8, let me now provide a few details for activity. Propulsion revenue reached €4 billion, up 26%, Civil OE grew strongly. Q3 was a record quarter with 511 LEAP engines delivered, up 40% year-over-year and up 25% sequentially. Civil aftermarket remained very dynamic, with spare parts up 16%, mainly driven by CFM56 and IceRust engines, both of them benefiting from sustained volumes and higher work scope. CFM56 gross prices were up mid to high single digits in August. LEAP also contributed positively over the period. In the first nine months, spare parts sales were up 19.5% at the top end of our guidance. Services were up 24%, mainly driven by LEAP RPSH contracts, but also high-thrust engine service contracts. Over nine months, services increased by 22.2%, beyond our guidance, but as you know, it has no additional impact, even our profit recognition methodology. Military engine revenue declined year over year, notably due to a softer level of aftermarket activity and slightly fewer MATA deliveries to end customers. Equipment and defense revenue increased by 12% to 3 billion euros, with both OE and aftermarket growing at a similar pace. Higher OE sales were fueled by aircraft ramp-up, driving increased demand for landing gear, electrical and power systems, nacelles, and adionics. Defense also continued to benefit from strong momentum, especially in the guided-bomb hammer, missile seekers, navigation, and timing systems. Services continued to perform well, supported by strong air traffic levels, which resulted in two ongoing demand, in particular for landing system, electrical system, and nacelles. Aircraft interiors posted revenue of 800 million euros, up 10%. OE sales increased by 12%, supported by steady growth in the cabin business, benefiting from aircraft ramp-up. Business class seat deliveries, however, face headwinds from certification, which remains a key challenge in the sector. Services were up 7%, driven by cabin activities, with very good momentum in Middle East and Asia. A few additional points on slide 9. First, on the share buyback program. As of October 17, we hold approximately 5.1 million treasury shares, designated for cancellation, and we are currently finalizing the ongoing 500 million euro tranche, which will be completed by December 5th. All these shares, representing a total of 1.4 billion euros, will be canceled by the end of 2025. Some update on the tariff environment. Now that bilateral agreements have been negotiated, we are better positioned to assess and manage the risk associated with tariffs. The agreement between the U.S. and the EU, as well as the eligibility of our products under the USMCA regime, have significantly reduced the amounts at stake. In this fluid environment, Safran remains agile and actively continues to implement mitigation measures and commercial actions. Nonetheless, a residual impact remains, primarily related to flows between China and the U.S., what we call Section 232 on aluminum, steel, copper, or products which are not eligible under bilateral agreements. So the net impact on the recurring operating income, which is now included in the full year 2025 outlook, is expected to be a negative 100 to 150 million euros in 2025. Olivier, back to you.