Safran - Full-year outlook profit raised

PRESS RELEASE

Safran reports its third quarter 2024 revenue

Full-year outlook profit raised

Paris, October 25, 2024

Consolidated data

•       Q3 2024 revenue: €6,682 million 

•       9m 2024 revenue: €19,886 million

Foreword 

§  All figures in this press release represent adjusted data, except where noted. Please refer to the definitions and reconciliation between Q3 and 9 months 2024 consolidated revenue and adjusted revenue. Please refer to the definitions contained in the footnotes and in the Notes on page 7 of this press statement.

§  Organic variations exclude changes in scope and currency impacts for the period.

CEO Olivier Andriès said: “In light of the strong performance in the first 9 months of the year, with a

17% growth in revenue driven notably by aftermarket activities for engines and aircraft equipment, Safran is raising its full-year profit forecast. Narrowbody OE deliveries were limited by supply chain bottlenecks in specific areas. The Group's priority remains to best meet customer needs and unlock supply chain constraints. We remain very confident in our ability to continue on a path of profitable growth in the years to come, which we will present at our upcoming CMD.”

Q3 and 9m 2024 revenue

Ø Q3 2024

Q3 2024 revenue stood at €6,639 million, up by 14.0% compared to Q3 2023 (+13.8% on an organic basis) driven by civil aftermarket and robust growth from Equipment & Defense and Aircraft Interiors. Change in scope was €57 million^[1] within Equipment & Defense. Currency impact was

€(45) million, with an average €/$ spot rate of 1.10 in Q3 2024 (1.09 in Q3 2023). €/$ hedge rate in Q3 2024 stood at 1.12 (1.13 in Q3 2023).

As for organic revenue per division: 

§  Propulsion was up by 9.2% driven by services growth. 

Civil aftermarket (in $) grew by 20.5% compared to Q3 2023, reflecting another strong increase in LEAP rate per flight hour (RPFH) contracts and to a lesser extent CFM56 and high-thrust engine spare parts sales. 

LEAP engine deliveries were up sequentially with 365 units in Q3 2024 (297 units in Q2 2024) but were down 6% compared to Q3 2023 (389 units) as supply chain performance still requires enhancement.  

Military engine revenues rose year-over-year, driven by a higher level of services and Original Equipment (OE) benefiting from a favorable mix and higher M88 deliveries.

Helicopter engine revenue growth was driven by OE with increased turbine deliveries (notably

Arriel).

§  Equipment & Defense was up by 16.3% driven by all businesses, notably defense, nacelles and landing systems.

OE sales registered a 19.0% increase, driven by higher volumes in nacelles (A320neo, G700), electrical systems (787, A320neo) and avionics (Actuation Systems). In defense activities, substantial growth was fueled primarily by guidance systems. The growth momentum observed in the first half slightly slowed in Q3, in particular due to decreased demand from one airframer for equipment required at the start of the assembly line. 

Aftermarket services were up by 12.6%, with growth across all activities, notably in landing systems (carbon brakes) and to a lesser extent in electrical systems.

§  Aircraft Interiors continued its sales expansion with a solid 28.4% increase although it remains 4% below 2019 levels. 

OE sales growth (+30.2%) is mainly attributed to Seats with a significant increase in business class seat deliveries (592 units in Q3 2024 vs. 174 in Q3 2023 and 508 in Q2 2024). Additionally, Safran Passenger Innovations (IFE) contributed with an increase in entertainment system deliveries to airlines.

Aftermarket activities (+25.4%) were robust in both Cabin (primarily spare parts) and Seats (notably with Asian and Middle East airlines), driven by the recovery of the widebody market. 

Ø 9m 2024

Revenue for the first nine months of 2024 amounted to €19,686 million, up 17.4% compared to 9m 2023. Sales increased by €2,850 million (+17.0%) on an organic basis mainly thanks to Equipment

& Defense and Propulsion (o/w civil aftermarket, +26.2% in $). Change in scope was €105 million^[2]. Currency impact of €(39) million reflects a negative translation impact of USD revenues, with an average €/$ spot rate of 1.09 in 9m 2024 (1.08 in 9m 2023). €/$ hedge rate in 9m 2024 was at 1.12 (1.13 in 9m 2023). 

Currency hedges

The hedge book amounts to $54.0 billion in September 2024, compared to $54.4 billion in June 2024. 

§  2024 is hedged: targeted hedge rate is $1.12, for an estimated net exposure of $12.0 billion.  

§  2025 to 2027 are hedged: targeted hedge rate between $1.12 and $1.14, for an estimated net annual exposure of $13.0 billion.

§  2028 is almost fully hedged: $11.9 billion hedged out of an estimated net exposure of $13.0 billion.

Share buybacks

In July 2023, Safran announced a €1 billion share buyback for cancellation to be carried out in 2024 and 2025. A first tranche of €250 million was completed in August 2024 (1.3 million shares repurchased). On September 20, 2024, Safran launched a second tranche for a maximum amount of €500 million to be carried out no later than December 11, 2024. 

All shares repurchased during these two tranches will be cancelled by the end of 2024.

The remaining €250 million will be repurchased in H1 2025.

Portfolio management

Safran acquired Preligens, a leader in artificial intelligence (AI) for aerospace and defense for an enterprise value of €220 million. The company was renamed Safran.AI and is integrated within Safran Electronics & Defense.

On September 10, 2024, Safran announced the contemplated acquisition of the US company CRT

(Component Repair Technologies), a world leader in the repair of aircraft engine parts, based in Ohio, USA. This acquisition reflects Safran’s plan to strengthen its maintenance, repair and overhaul (MRO) capabilities in the Americas. The closing of the transaction is expected by the end of 2024.

Full-year 2024 outlook updated

Despite revised downward expectations for OE deliveries on narrowbody aircraft, the strong performance in the first 9 months of the year enables Safran to update its full-year 2024 outlook (adjusted data):

§  Revenue around €27.1 billion (versus around €27.4 billion previously); 

§  Recurring operating income around €4.1 billion (versus close to €4.0 billion previously);  § Free cash flow around €3.0 billion, subject to the schedule of some advance payments.

This outlook is based notably, but not exclusively, on the following assumptions:

§  LEAP engine deliveries: around -10% compared to 2023 (vs. flat to 5% previously);

§  Civil aftermarket revenue (in USD): up mid-twenties;

§  €/$ spot rate of 1.10; 

§  €/$ hedge rate of 1.12.

The main risk factor is the supply chain production capabilities.

Potential impact of new tax measures in France

The French government has confirmed its intention to implement a temporary increase in the corporate income tax rate. A 41.2% surtax could apply in 2024, resulting in an overall rate of 36.13% (instead of the current 25.83%), and a 20.6% surtax could apply in 2025, resulting in an overall rate of 30.98%. If such a measure was to be implemented, Safran estimates that the additional current tax expense for 2024 would be in the range of €320-340 million, with the related cash outflow in 2025.

Other measures have been introduced in the draft Finance Bill, which could have a marginal impact on Safran:

•       the introduction of a new registration fee applicable to the cancellation of shares repurchased by the company,

•       the postponement of the abolition of the tax known as “CVAE” (Contribution on the Added Value of Enterprises).

* * * *

Agenda

Capital Markets Day in Paris                              December 5, 2024

FY 2024 results                                                 February 14, 2025

Q1 2025 revenue                                              April 25, 2025

Annual General Meeting                                    May 22, 2025

H1 2025 results                                                 July 31, 2025

* * * *

Safran will host today a webcast for analysts and investors at 8.30am CET. 

1) If you only want to follow the webcast and listen the conference call, please register using the following link: https://edge.media-server.com/mmc/p/b8miydfm  

ð Use this same link for the replay which will be available 2 hours after the event concludes and remains accessible for 90 days. 

2) If you want to participate in the Q&A session at the end of the conference, please preregister using the link below in order to receive by email the connection details (dial-in numbers and personal passcode):

https://register.vevent.com/register/BIb5dd0054d6ef46ab8d94b321987ea82d 

Registration links are also available on Safran’s website under the Finance home page as well as in the "Publications and Results" and "Calendar" sub-sections.

Press release and presentation are available on Safran’s website at www.safran-group.com(Finance section).

* * * *

Key figures

1.    Segment breakdown

2.    Number of products delivered on major aerospace programs

Notes

Adjusted revenue:

To reflect the Group’s actual economic performance and enable it to be monitored and benchmarked against competitors, Safran prepares an adjusted income statement in addition to its consolidated financial statements.

Safran’s consolidated revenue has been adjusted for the impact of:

 the mark-to-market of foreign currency derivatives, in order to better reflect the economic substance of the Group’s overall foreign currency risk hedging strategy:

-          revenue net of purchases denominated in foreign currencies is measured using the effective hedged rate, i.e., including the costs of the hedging strategy,

-          all mark-to-market changes on instruments hedging future cash flows are neutralized.

The resulting changes in deferred tax have also been adjusted.

Third-quarter 2024 and 9m 2024 reconciliation between consolidated revenue and adjusted revenue:

Safran is an international high-technology group, operating in the aviation (propulsion, equipment and interiors), defense and space markets. Its core purpose is to contribute to a safer, more sustainable world, where air transport is more environmentally friendly, comfortable and accessible. Safran has a global presence, with 92 000 employees and sales of 23.2 billion euros in 2023, and holds, alone or in partnership, world or regional leadership positions in its core markets. Safran undertakes research and development programs to maintain the environmental priorities of its R&T and Innovation roadmap.

Safran is listed on the Euronext Paris stock exchange and is part of the CAC 40 and Euro Stoxx 50 indices.  For more information : www.safran-group.com

        @SAFRAN                Safran          GroupeSafran              Safran_group

Press

Catherine Malek : catherine.malek@safrangroup.com / +33 1 40 60 80 28

Investor Relations 

Armelle Gary : armelle.gary@safrangroup.com / +33 1 40 60 82 46

Florent Defretin: florent.defretin@safrangroup.com / +33 1 40 60 27 30

Aurélie Lefebvre: aurelie.lefebvre@safrangroup.com / +33 1 40 60 82 19 

FORWARD-LOOKING STATEMENTS

This document contains forward-looking statements relating to Safran, which do not refer to historical facts but refer to expectations based on management’s current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance, or events to differ materially from those included in such statements. These statements or disclosures may discuss goals, intentions and expectations as to future trends, synergies, value accretions, plans, events, results of operations or financial condition, or state other information relating to Safran, based on current beliefs of management as well as assumptions made by, and information currently available to, management. Forward-looking statements generally will be accompanied by words such as “anticipate,” “believe,” “plan,” “could,” “would,” “estimate,” “expect,” “forecast,” “guidance,” “intend,” “may,” “possible,” “potential,” “predict,” “project” or other similar words, phrases or expressions. Many of these risks and uncertainties relate to factors that are beyond Safran’s control. Therefore, investors and shareholders should not place undue reliance on such statements. Factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: uncertainties related in particular to the economic, financial, competitive, tax or regulatory environment; the risks that the new businesses will not be integrated successfully or that the combined company will not realize estimated cost savings and synergies; Safran’s ability to successfully implement and complete its plans and strategies and to meet its targets; the benefits from Safran’s plans and strategies being less than anticipated; the risks described in the Universal Registration Document (URD).

The foregoing list of factors is not exhaustive. Forward-looking statements speak only as of the date they are made. Safran does not assume any obligation to update any public information or forward-looking statement in this document to reflect events or circumstances after the date of this document, except as may be required by applicable laws.

USE OF NON-GAAP FINANCIAL INFORMATION

This document contains supplemental non-GAAP financial information. Readers are cautioned that these measures are unaudited and not directly reflected in the Group’s financial statements as prepared under International Financial Reporting Standards and should not be considered as a substitute for GAAP financial measures. In addition, such non-GAAP financial measures may not be comparable to similarly titled information from other companies.