Safran Sa Unspon/ Adr

Good morning, everyone, and thank you for being with us today. So, Q2 continued on the strong trends observed in Q1, resulting in an exceptional first half, marked by a stellar demand in the civil engine aftermarket, a strong ramp-up in LEAP and M88 engine deliveries, and record financial performance. The Middle East conflict barely impacted our performance. Civil aftermarket activity is remaining well above our pre-conflict forecasts. Spare parts sales for civil engines increased by 28% in dollar value and civil engine services also grew by more than 40%. All this despite the geopolitical context in the Middle East. CFM 56 continued to drive spare parts performance with a fleet benefiting from a low level of retirement combined with a very strong demand for aftermarket. LEAP is also expanding with a fast-growing number of show visits Significant wear scope increase and more shop visits being performed by third-party maintenance repair and overall shops. We delivered 1,030 LEAP engines in H1, a 41% increase year-on-year, aligning four consecutive quarters with over 500 deliveries. All of this translated into record financial performance. Revenue reached 17.6 billion euros, up 20% on an organic basis. Recurring operating income climbed by 29% to 3.2 billion, representing an unprecedented operating margin of 18.4%. Free cash flow was even stronger, up 43% to 2.6 billion euros. Given this robust performance and the strong visibility in front of us, we are raising our four-year guidance. Lastly, disciplined portfolio management remains a priority. We completed the divestment of Safran Passenger Innovation and of our 50% stake in Easy Air, our past joint venture with Embraer. Regarding Aubert et Duval, Airbus and Safran recently completed the acquisition of TQO Capital's stake, further strengthening our objective to building a more resilient aerospace and defense supply chain. Turning to slide four. Saffron is benefiting from strong commercial momentum across its civil businesses. We continue to ramp up our capacity to support growing demand and strengthen the resilience of our industrial footprint. In Mexico, we opened end of June, we opened a new LEAP maintenance shop in Querétaro, and a new electrical wiring factory in Chihuahua. At Farnborough, Leap confirmed its position as the engine of choice on narrowbody platforms, as illustrated by the signature of an MOU by Indigo for more than 1,000 Leap 1A engines. Our largest ever engine order to power its A320neo family fleet and support its new MRO facility. BOC Aviation also placed an order for up to 300 LEAP engines. The new LEAP Premier MRO license with IAG and CFM, together with the full-fledged LEAP engine shop being developed in Singapore through our joint venture with Singapore Airlines, will further expand maintenance capacity and strengthen the global LEAP ecosystem. We are also preparing the future of flight. Electra, a U.S. company, selected Safran's turbogenerator, Turbogen 600, for its EL9 hybrid electric aircraft, a short and take-off and landing aircraft, with an initial order for 250 units. Turning to slide 5, RISE technologies are now being matured towards ground and flight test demonstrations this decade. Since CFM unveiled RISE in 2021, approximately 500 test campaigns and more than 5,000 endurance and dust cycles have been completed across OpenFAN. and Hybrid Electric Technologies, mobilizing more than 2,000 CFM engineers in both sides of the Atlantic Ocean. The program is moving from concept to reality. The compact core modules, the open fan blade and the OGV airfoils have passed preliminary design reviews enabling the program to enter the detailed design, manufacturing, and physical realization phase of the demonstrator, leveraging decades of expertise, including four composite fan blades in saffron. Mechanical and material tests are underway on blades and OGV, including impact, ingestion, fatigue, endurance, load, icing, and vibration response. Wind tunnel campaigns have also demonstrated aeroacoustic performance above technology maturation objectives. Durability is being addressed earlier than ever in the new technology development cycle. More than 2,000 dust ingestion cycles have already been completed on next-generation HPT airfoil in an engine core. A second campaign is now testing RISE HPT technologies in our more product representative LEAP-1B engine to assess their potential benefits for the fleet. On the fan system, the first high-speed, low-pressure turbine has been tested for more than 1,000 hours, validating aerodynamic design and aerothermal performance. The next milestone? is the preparation of a full-scale front module test in our new test cell at Villaroche, progressively building towards the low-pressure system, including the reduction gearbox. Finally, on hybrid electric, Safran has launched the Phileas ground test campaign at Istres, a full-scale engine demonstrator with two electric machines installed on the high-pressure and low-pressure shafts with a campaign plan for approximately six months and nearly 300 hours. We are using our Silvercrest engine for those tests. Turning to slide six, defense continues to show a particularly strong momentum. Eurosatori confirmed the depth of demand which we are converting into major wins and partnerships. We are, once again, ramping up capacity in critical areas with major investment in hemispheric resonant gyroscope inertial navigation in Montluçon. In positioning navigation and timing equipment and electronics in Germany, and Optronics and Surveillance and Recognition System in Dijon, France. Numerous new partnerships were announced recently, supporting our global expansion as more than 80% of our defense electronics backlog is international. Safran joined Airbus, Destinus, MBDA Deutschland and Thales, in signing a letter of intent to establish the Blixem Exo-Consortium and develop a sovereign European exo-atmospheric interceptor against medium and intermediate range ballistic missiles. Finally, we are converting this demand into major wings. Thunderdart is a key illustration with Safran and MBDA selected to provide France Thank you Olivier, good morning everyone.

Today I will guide you through the adjusted accounts and you will find a reconciliation to the consolidated statements in the appendix. So let's begin with the FX trends which are highlighted on slide 8. In the context of the ongoing Middle East crisis and its impact on the macroeconomy, volatility persisted during the first half with the dollar strengthening against the euro, moving from 118 to 114. Given the level of activity observed in H1 2026, it is likely that we will need to revise upwards the volumes to be hedged for the remainder of the year and for future periods. This does not call into question the hedged rates targets shown in the graph starting with 1.12 in 2026. Overall, our hedged portfolio continues to serve as a key protection mechanism, providing us with solid visibility on future dollar exposures despite Currency Relativity. Now let's turn to revenue and recurring operating income on slide 9. Revenue reached 17.6 billion euros in H1, representing a 19% increase on a reported basis and more than 20% organically. The negative currency impact of 742 billion euros reflects an average spot rate of 1.17 compared to 1.09 in H1 2025. This impact was partly offset by the scope effect, which had a positive impact of €560 million, mainly due to the acquisition of Codin's Actuation and Flight Control activities, and partially offset by the divestment of Safran Passenger Innovations. Recurring Operating Income rose by 29% to €3.2 billion, significantly outpacing revenue growth. Despite some costs increases in certain materials, Partly offset by tariff refunds, the margin improved by 140 basis points, reaching a record 18.4%. The main drivers of this performance were robust revenue growth, the outstanding performance of the civilian engine aftermarket, strong defense activities, and as usual, a sustained focus on operational excellence across the group. Moving on to slide 10, you will find a summary of the income statement. One of items amounted to minus 177 million euros, which include program impairment charges, M&A transaction costs, and the outcome of commercial discussions concerning past operations. Net financial expense was 123 million euros. This includes a positive 57 million euros of net financial interest, reflecting our positive net cash position, as well as 188 million euros foreign exchange loss, which includes the impact of reassessing US dollar provisions. The reported tax rate was 33%, which reflects a 322 million euros impact from the French corporate surtax. Without this surtax, the effective tax rate would have been 22%. With the increased EBIT guidance, you should now expect nearly 500 million euros impact for the full year, meaning an additional 180 million euros in the second half from the surtax. Overall net income attributable to the parent reached 1.9 billion euros, up 21% year over year, resulting in earnings per share of 4 euros and a few more. Turning now to propulsion on slide 11, revenue reached 9.2 billion euros in H1, up 28% organically, driven by the strong momentum in both civil and military engines. In civil engines, aftermarket growth exceeded our expectation. Spare parts sales grew by 28% in dollars, mainly supported by a continued favorable work scope mix on the CFM56, something we have seen since mid-2025, as well as a higher contribution from Leap Aftermarket with an increase in external shop visits. Pricing also supported growth on both CFM56 and Leap. In addition, civil engine services were particularly strong, up 40% in dollars, led by Leap RPA Fetch Contracts. It's important to note that the trigger to recognize LIP1 BRPFH profit has not yet been reached. The introduction of the Maverick lay is planned for later this year or early next year. On OE, we delivered 1,030 LIP engines in the first half of 41% year-over-year, including 24% growth in the second quarter. This marks the fourth consecutive quarter with over 500 deliveries. and you can expect further sequential growth in the second half. Military engines also contributed positively. As announced, Rafale production is ramping up from two aircraft per month in 2025 to four per month by 2029, resulting in MMT-8 engine deliveries more than tripling in the first half. Revenue growth also benefited from the favorable customer mix and a solid level of services. Helicopter turbines benefited mainly from the aftermarket activity, while OE was slightly down due to ongoing supply chain challenges. Missile propulsion systems continue to grow, driven by increased deliveries. By the end of this year, we will have tripled our missile turbojet capacity compared to 2022. Recurring operating income reached €2.3 billion, up almost €500 million versus H1 2025. The margin increased by 120 basis points to 24.5% of sales record, exceeding our annual guidance of 22 to 24%, mainly thanks to the outstanding performance of the civil engine aftermarket and continued strength in military engine deliveries. Moving on to equipment and defense, slide 12. Revenue reached 6.9 billion euros in H1 2026, up 14% organically. The scope effect primarily reflects the full integration of the flight control and actuation business. Organic growth also takes into account the transfer of software ventilation systems from aircraft interiors to equipment and defense. Without this transfer, organic growth would have been 12.4%. On the equipment side, we observe higher OE volumes across the board. with particularly strong performance in NAFAS for the A320neo. Electrical systems also delivered solid results, driven by strong demand for programs such as the 737 MAX, A320neo, and the A350. Defense activities made a solid contribution as well, especially in inertial navigation systems, which recorded strong double-digit growth, along with robust performance in electronics and the AMER guided boat. Aftermarket services grew across all segments with especially strong growth in electrical systems notably on the A380 and in nacelles for the A320M. Recurring operating income reached €907 million at €204 million year-over-year. The margin improved by 60 basis points to 13.1% all by 110 basis points to 13.6% excluding the contribution from the actuation business. All business units contributed to the strong overall performance supported by higher volumes, improved pricing, and continued focus on operations. Turning now to slide 13 on aircraft interiors, revenue reached 1.5 billion euros at 6.6% organically, When you exclude the transfer of SAFRA ventilation system to a container defense, organic growth would have been 12.2%. In cabin, aftermarket growth was led by spare parts, notably on the A350, A220, with good dynamics in all geographies. OE volumes also increased, driven by A350 lavatories, as well as 737 and A320 galleys. Business Class Seats Deliveries increased by 4%, with a 21% catch-up in the second quarter. OE performance was also supported by a favorable pricing effect, in line with the Right Pricing for Value strategy that we presented at our CME. Aftermarket activities delivered good growth in both spare parts and services. Recurring Operating Income doubled to €54 million. lifting the margin by 200 basis points to 3.7%, despite the deductive impact of the SAFRA passenger innovation divestment and the transfer of SAFRA ventilation systems. This margin expansion was driven by pricing on cabins and business class seats and volume in spare parts. This performance confirms that Aircraft and Serials remains firmly on track with its roadmap for continuous margin improvements. Turning now to slide 14, free cash flow generation increased by €800 million to €2.6 billion, up 43% year-over-year, resulting in a very strong EBIT to cash conversion ratio of over 80%. This excellent performance was driven by a 24% increase in EBITDA, as well as the positive changes in working cap. Indeed, inventory growth was More than are saved by increases in advance payments and deferred income, which benefited from defense-related advance payments and deferred income related to the RPFH contracts on leap. It is worth highlighting that inventories grew at a slower rate than sales, allowing us to reduce our inventory DSO by five days. Income tax payments remain broadly stable, as the cash impact of the French surtax will take place in the second half of the year. We continue to invest significantly to support our growth. Tangible CAPEX reached 750 million euros at 15%, with spending focused on capacity expansion across the group, particularly for LIP-OE, MRO activities, and defense electronics. Looking at slide 15, Safran's net cash position remained almost stable at 1.7 billion euros. 90% of the cash generated in the first half was used to pay the dividend of 3.35 euros per share, totaling 1.4 billion euros, and to finance the share buyback program. In the first six months, we bought back 2.6 million shares for consolation purpose. And looking specifically at the share buyback program, Between Jan and July 2026, we repurchased around 2.8 million shares for consolation. It's about 0.7% of the share capital, for a total amount of 875 million euros. These shares are scheduled to be consoled before year-end, and we also plan to launch an additional tranche in the coming weeks, which will be executed before the end of the year. M&A activity resulted in a limited net inflow. of 33 million euros, mainly reflecting the divestment of SPI, partly offset by smaller acquisitions including Syntony in inertial navigation. Finally, reflecting Safran's strong financial discipline, 3,000 pools upgraded the outlook on Safran's A-minus credit rating to positive in July 2026. With that, I'll hand it over back to you, Olivier.

Thank you, Pascal. I am now on slide 17. Building on our strong first-half performance and sustained momentum across both civil aerospace and defense, we are raising our 2026 outlook. Revenue should increase in mid-teens above €36 billion. Recurring operating income guidance is improved by Thank you very much. Their parts and services revenues are expected to be up in the mid-20s, while lead deliveries are now expected to be up in the high teens. Thank you, and we are ready now to answer to your questions.