Safran Investors roadshow

Transcription

1 Safran Investors roadshow Europe & North America June 2010

2 Safran An international high-technology group Tier-1 equipment supplier 2

3 A tier-1 leader in Aerospace, Defence & Security FY 2009 Key figures Aircraft Equipment 2009 revenue by activities 26% Aerospace Propulsion 10% Defence 54% 9% Security 1% Holding Revenue Recurring operating income Net income - Group share Free Cash Flow Net cash (debt) 3 10,448 M 698 M 376 M ( 0.94/share) 818 M (498) M (11% gearing)

4 Leading market positions Businesses with high technological barriers to entry Aerospace Propulsion Aircraft Equipment Single aisle aero-engine Helicopter aero-engine Landing gear Wiring Power transmission Biometric and ID solutions Helicopter Flight Control Space Propulsion Engine nacelles Wheels & brakes Detection Military Engine 4 Defence and Security Inertial navigation systems Optronic systems: #1 Europe

5 A tier-1 supplier in aerospace What do we do Aircraft Equipment Engine equipment and parts Integrated engine control systems Power transmissions Engine modules and components Composite engine parts Network server systems Back-up flight control Secure data link Cockpit control systems Electrical wiring systems Aircraft condition monitoring systems Composite aerostructures Auxiliary power units Hydraulic systems Sensors and actuators Ventilation/filtration Inertial references Engine services Maintenance, repair and overhaul Engine testing and test equipment Nacelles Nacelles and components (thrust reversers, ) Engines CFM56 family (50/50 with GE) SAM146 engine for the Superjet 100 Regional Jet (50/50 with NPO Saturn) Participation in programs: CF6, GE90, GE90-115B, GP7000, PW4000, AS900, CF34, GEnX 5 Landing & braking systems Landing gear for all types of aircraft Braking/landing control systems Wheels and carbon brakes Control systems and hydraulics Maintenance, repair and overhaul

6 Successful CFM partnerships CFM56, the best selling civil engine ever June 1973 July 2008 Next generation engines (LEAP-X) CFM56 SAFRAN / GE RENEWAL PARTNERSHIP UNTIL RENEWED UNTIL Services Nacelles Richard Richard Nixon Nixon Georges Georges Pompidou Pompidou 6 The largest worldwide fleet of engines: 20,000+ CFM56 engines delivered to date Among the youngest fleet of engines: 70% of the 2nd generation engines have not yet had their 1st shop visit LEAP-X selected to power the COMAC C919. Places the group in a favourable position for the future development of worldwide single aisle fleets

7 Outstanding fleet of CFM56 engines Active installed base over 19K engines Start of maintenance services for new, long lasting models ( number of engines ) Iraq war / Gulf war 100 (change in global CFM56 spares revenue) Over 5-year backlog to date in CFM OEM (>6,000 engines) Base Year CFM engines Global spare parts revenue (in $ base in 2000)

8 Security becoming a strong third pillar An attractive investment case consistent with our business model 3 strategic acquisitions in Biometric ID and Detection systems for a total cash-out of 865 m HomeLand Protection Tomography-based detection systems Consolidated since Sept % ownership ( 407 m) Fingerprint ID systems Consolidated since April % ownership ( 133 m) Secure ID documents Consolidated since Sept % ownership ( 325 m)

9 A resilient business mix Solid performance in an unsettled environment Aerospace Propulsion Aircraft Equipment Defence and Security 15% 32% 49% Potential: 60% Potential: 45% Potential: 40% Recurring revenues = services, upgrades, maintenance, consumables related to long-term contracts 9

10 Equity shareholding $11.4bn market cap (May 31, 2010) As of May 31, 2010 Public French State 30.2% 40.6% Areva 7.4% Treasury shares56 % 4.2% 10 Employees 17.6%

11 Safran 2009 Highlights 11

12 2009 financial highlights Solid performance in an unsettled environment Recurring operating income at 6.7% of revenue highlighting good control of cost base Growing revenue with strong performance in Security (+38%) +1.5% 10, % 10,289 Higher net profit (group share) at 0.94 per share % ( M) ( M) FY 08 FY 09 ( M) FY 08 restated pro forma FY 09 FY 08 restated pro forma 2009 dividend back to 2007 level +52% Lower net debt despite significant acquisitions in Security. Driven by strong CF and controlled WC 0.38 FY 08 FY 09 ( M) 0.25 (498) ( ) FY FY 09 (635) M FY 09

13 Year in review Key strategic business achievements Reinforced our leadership in aviation propulsion 20,000th CFM56 delivered; 6,000+ engines in backlog (795 new orders) Selected as sole western supplier for C919. Potential follow-up as Airbus and Boeing analyse A320/B737 re-engining opportunities Newly acquired strategic assets in Security had a robust contribution to our performance 204M in revenue and 52M in profits from operations (before PPA) 13

14 Aerospace Aerospace OE impacted, but CFM workhouse continued at top rates CFM engines (On Dec. 31) Total installed base ,565 19, % 51% 53% 2 pts Share of 2nd gen. engines Change Number of deliveries 1. CFM56 engines 1,268 1,263 Flat 2. Helicopter engines 1,155 1,032 (11)% % (48)% 5,063 4,771 (5.8)% 3. A380 nacelles 4. Small nacelles (biz & regional jets) OE revenue* Prop. & Equipment (in M) * Including revenue from R&D contracts and miscellaneous 14 Increased share of 2nd generation CFM engines in fleet future flow of high value services CFM56 deliveries broadly matched record 2008 level 2. Impact of decline in small helicopters 3. Ramp-up of A380 nacelles 4. Impact of business & regional jets decline

15 Aerospace Resilient total services revenue Services* revenue FY 2008 FY 2009 Change (in M) Aerospace Propulsion Services share of total revenue Aircraft Equipment Services share of total revenue Total services revenue 2,729 2, % 46.9% 49.2% 2.3pt % 31.2% 31.8% 0.6pt 3,596 3, % Services revenue: overall resilience High performance for services to military customers (aircraft and helicopters) Growth in high thrust widebody engine spares Healthy growth of repairs activities for civil engines offsetting spares softness * Including spares and maintenance & repair activities 15

16 Aerospace CFM fleet status: more 1st gen grounded but 2nd gen back in service Number of grounded planes equipped with CFM56 engines Dec 31, aircraft Dec 31, aircraft Grounded CFM-equipped aircraft represent 6% of the total CFM fleet vs. 14% for the total active aircraft market* 9% Increasing number of B737 Classic aircraft being grounded or retired while B737NG and A320 returned to traffic 23% 91% 77% 1st CFM56 generation (-2, -3, -5A, -5C) 2nd CFM56 generation (-5B, -7) No significant new CFM56 order cancellations vs Backlog at 6,000+ engines 795 new orders * Source : Safran 16

17 Aerospace CFM services status: more 2nd gen revenues Worldwide CFM spares revenue in $ -4.6% in FY 2009, with short term volatility 45% of CFM active fleet still to have their first shop visit Favourable mix towards a higher proportion of 2nd gen. engines with higher material revenue per shop visit Dec. 31, 2008 Dec. 31, 2009 CFM56 shop visits 2,415 1st gen. 60% 2nd gen. 40% (total worldwide) 2,273 Total -5.9% 1st gen. CFM % 2nd gen. CFM % 1st gen. 52% 2nd gen. 48% Shop visit numbers are estimates; these can be revised marginally as airlines finalise reports 17

18 Security Creating a strong franchise in security Successful integration of Printrak and GE HLP Work initiated on commercial and cost synergies Product and technology roadmap on track Finger on the fly, face on the fly, CTX 9800, CTX5800 New significant contracts awarded ID solutions: FBI next generation (fingerprint), British travel & identity documents Airport security: Smartgates (Australia & New Zealand), Israel Port Authority (CTX, XRD) Strong organic growth (+11%) driven by Identification solutions 18

19 Defence Robust niches in defence matching asymmetric threat need A robust order intake leading to a record backlog of 2.1bn New order for 16,454 Felin integrated equipment suites A long term order of 3,400 inertial / laser-guided AASM air-to-ground weapons Ramp-up of AASM and IR seekers deliveries Very strong dynamic in optronics Night vision goggles, thermal cameras Equipment for UK s Ministry of Defence (FIST program) and US Army Creation of Safran Electronics As a centre of excellence for embedded electronics and software 19

20 Improving efficiency with Safran+ Fast track to G&A and WC reduction Overhead expenses Working Capital Overhead expenses down 8% yoy, about (100)M savings Savings breakdown Miscellaneous Consumable Storage, handling & transportation Travel & reception Fees 20 Repair & Maintenance Improved inventories by over 400M or 16 days at constant perimeter Implementation of a group project to facilitate the synergies and share good practices Implementation of ambitious action plans in each company with good implication of managers and operational Development of inventories management tools (simulation) in several companies Realization of lean projects to reduce cycles Optimization of the supply-chain

21 2009 income statement EPS growth of 49% (In M) Revenue FY 2008 FY 2008 reported restated FY 2008 restated pro forma FY ,329 10,329 10,289 10, % 6.3% 6.4% 6.7% % of revenue 7.7% 7.9% 7.8% 6.3% Net finance (cost) income (203) (154) (174) Income tax expense (101) (123) (98) Profit (loss) from discontinued op. (233) (233) (4) (15) (15) (14) Profit - group share Basic EPS (in ) Recurring operating income % of revenue Profit from operations Minority interest Income from associates Non recurring cost of exit from Communications business in Of which cost of net debt of (38)M Of which current tax expense of (64)M

22 Research & Development Ongoing structural high level of R&D FY 2008 FY 2009 Change Total self-funded R&D (before credit tax*) (22) % of revenue 6.8% 6.6% (0.2)pt Recorded as operating expenses Activated expenses (46) FY 2008 FY 2009 Change (In M) (In M) Recorded as operating expenses Ebit impact before R&D credit tax* Ebit impact after R&D credit tax* Amortisation / depreciation * Crédit Impôts Recherche in France 22 R&D effort maintained with normative trend at 6 to 7% of revenue Tailing off of R&D developments on SaM146 engine and A380 equipment Credit tax* impact of 94M in 2009 vs. 99M in 2008 (71)M depreciation charge impacted profit from operations

23 3-year hedging policy Aiming to preserve profitability and results visibility Achieved a rate of $1.42 in 2009 (vs. $1.43) Hedge portfolio, Feb 22, 2010 Forward contract Others (Stop loss, accumulators, options) In US$ bn : $1.47 achieved from $1.525; now aiming for $ ~ : $1.40 improved to $ Achieved Target /$ hedge rate 23 Strategy is to gradually lock-in $ at a better rate than current spot rate for 2012 and then for 2013 with a mid term target of $1.35

24 3-year hedging policy Strategy is to reduce future swings in profits Estimated impact on recurring operating income of targeted /$ hedge rates /$ hedge 1,46 rate , EBIT impact vs. previous year 300 (In M) 1,36 c Currency impact on profitability is around 2/3rd in Propulsion and 1/3rd in Equipment; non material for Defence and Security businesses 150 c.110 1, , , E 1,16 1, E 2012E 2013E 0-50 (80) Material tailwind expected in 2011 & 2012

25 Net debt Lower net debt despite 0.55 billion acquisitions (in M) Net debt at Dec 31, 2008 Net debt at Dec 31, 2009 Factoring Tangible & of CFM Intangible receivables Capex Change in WC 143 Cash flow 218 Net cash at Dec 31, 2009 before acquisitions (585) Strong FCF generation, with improved WC Dividend (73) Others (57) 53 1,042 (551) (635) Acquisitions Net cash position of 53M before acquisitions (498) WC improved by 218M despite lower revenues & application of new LME law on payables Resumption of factoring of CFM receivables 818M Free Cash Flow Gearing of 11% 25

26 Gross cash & debt The Group is adequately funded Gross debt repayment schedule Available financing resources: Committed & undrawn = 1.1bn (Dec. 31, 2009) 1,250m EIB loan - 300M, undrawn, maturity 2020; subject to 2 covenants (net debt/ebitda <2.5 and Gearing <1; 1,087 1,000m 867 respectively 0.40 and 0.11 at Dec. 31, 2009) Credit line - 800M, undrawn, maturity Jan. 2012; no covenants 750m Bond - 750M, maturity Nov. 2014; 4% annual coupon, no covenants Others 67 EIB Employee savings CP m Successful inaugural bond issue m Syndicated 500 credit facility 100 Spot credit 454 CP 170 Employee savings CP 744 Bond 121 Others: 5 Finance leases 0m Repaid on Jan. 15, Others: 42 EIB 116 <1 year <1 year 67 1 to 5 years >5 years

27 Balance sheet highlights Solid balance sheet Shareholders equity up by 620M (In M) FY 2008 FY 2009 Goodwill 1,756 2,126 Tangible & Intangible assets 5,219 5, Operating Working Capital 1, Net cash (debt) (635) (498) Shareholders equity - Group share 3,733 4, Non current liabilities (excl. net debt) 1,455 1,739 Provisions 2,356 2, Other non current assets Minority interests Other current liabilities / (assets) net 27 Goodwill up 370M (mainly GE HLP) Net debt reduced by 137M OWC reduced by 201M at 965M (9.2% of revenue) Provisions remained stable

28 Safran Outlook 28

29 Aftermarket trends in Propulsion Growth to resume from H onwards CFM56 spares to create strong value again 7,000+ second gen. engines yet to receive 1st shop visit Base 100 Global CFM spares revenue in $ Flying hours level +2% at ~42 million hours in 2010; back to end 2007 level However quarterly trends to remain volatile for next 12 months E 11E 12E 2013E Services in military, helicopters and high thrust engines to continue to grow Overall aftermarket in Propulsion expected to grow by around 5% in $ in 2010, starting from low trends in H1 and start rising from H2 29

30 Margin recovery plan in Equipment A 2 to 3-year robust plan In past decade, Safran gained market share on every new program Nacelles Nose LG Main LG Wheels brakes Equipment shipset value P $16-18M Increased shipset value (now visible) A380 Program delays and lower volume impact profitability over A400M P P P P 6M B787 P P P P $4-5M P P P $4M Expected future volume growth should at last positively impact margins P A350XWB P Robust roadmap to improved profitability On-going discussion with Boeing and Airbus on programs which suffered from delays Specific plan for the Nacelle activity to reach recurring operating breakeven by mid-2011 Grow services (carbon brakes, landing systems, nacelles) Expected volume recovery from 2011 in business and regional jets Continue to improve productivity and reduce cost base 30 Wiring

31 Positioning for profitable growth Continuing to improve our cost base 2005* employees 50, employees 54,900 Investing in high tech and capital intensive facilities in France (Montluçon, Bordes, Massy, Bidos) bringing technological & productivity step-change International 36% International 28% France 64% France 72% while continuing to globalize our industrial footprint with opening of 2 new facilities in Mexico in 2010 (*) at comparable perimeter with 2009 People 50% % Purchases in $ / emerging zones (BUY) Emerging zones Production workforce in $ / emerging zones % 20% (MAKE) 10% $ zones %

32 Q highlights Revenue in line with annual outlook Q revenue: 2.43bn, -2.5% yoy Solid revenue contribution from Defence (Optronics) and Security (Detection) Stability in Aerospace Propulsion Aircraft Equipment down: lower volumes in nacelles and landing systems, in particular in business and regional jet segments and as a consequence of A380 aircraft delivery slippages Services share of revenue remained stable at 48% in Aerospace Propulsion and increased to 34% in Aircraft Equipment Improvements are definitely on the horizon Renewed traffic growth for passenger and freight Aircraft manufacturers plans to increase narrowbody airplanes production rates in outer quarters Return to service of a significant number of CFM56-equipped aircraft 32

33 2010 outlook Recurring operating income expected to increase over 2010 The Group expects revenue to be similar to 2009 The Group is confident that recurring operating income should increase moderately (at a targeted hedge rate of USD 1.46 to the Euro) Free cash flow is expected to represent approximately half of the recurring operating income Underlying assumptions A targeted hedged rate of USD1.46 to the Euro (currently at USD1.47) A forecast 4-5% increase in global air traffic A stabilization or slight decrease in original equipment commercial aviation business A slight growth in sales of services, back ended (H2 2010) Strong and profitable growth for the Security business On-going Safran+ plan to enhance profitability and reduce overheads 33

34 Healthy prospects beyond 2010 Key profitability growth factors Growth in Services CFM spares revenue should double in 10 years Military, helicopters and high thrust engines to continue to grow Profitable growth in Security Strong demand for our technology Long term target: 20% of revenue & mid-teen operating margins Favourable hedge rates Targeting $1.35 for 2012 &

35 Safe harbor For forward looking statements Except for historical information, all other information in this presentation consists of forward-looking statements within the meaning of the US Private Securities Litigation Reform Act of 1995, as amended. These forward looking statements include statements regarding the future financial and operating results of Safran such as (i) expected revenue for full year 2010, (ii) expected profit from operations for the full year 2010 and 2011 and iii) free cash flow for the full year Words such as "expects," "anticipates," "targets," "projects," "intends," plans," "believes," "estimates," variations of such words and similar expressions are intended to identify such forward-looking statements which are not statements of historical facts.these forwardlooking statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to assess. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. These risks and uncertainties are based upon a number of important factors including, among others: our ability to operate effectively in a highly competitive industry with many participants; our ability to keep pace with technological advances and correctly identify and invest in the technologies that become commercially accepted; difficulties and delays in achieving synergies and cost savings; fluctuations in the aerospace market; exposure to the pricing pressures in the regions in which we sell; the pricing, cost and other risks inherent in long-term sales agreements; exposure to the credit risk of customers; reliance on a limited number of contract manufacturers to supply products we sell; the social, political and economic risks of our global operations; the costs and risks associated with pension and postretirement benefit obligations; the complexity of products sold; changes to existing regulations or technical standards; existing and future litigation; difficulties and costs in protecting intellectual property rights and exposure to infringement claims by others; compliance with environmental, health and safety laws; the economic situation in general (including exchange rate fluctuations) and uncertainties in Safran s customers businesses in particular; customer demand for Safran s products and services; control of costs and expenses; international growth; conditions and growth rates in the aerospace industry; and the impact of each of these factors on sales and income. For a more complete list and description of such risks and uncertainties, refer to Safran s Document de Référence for the year ended December 31, Safran disclaims any intention or obligation to update any forward-looking statements after the distribution of this news release, whether as a result of new information, future events, developments, changes in assumptions or otherwise. * Adjusted data 35

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37 Safran Additional Information 37

38 Aerospace Propulsion Key figures FY 2008 restated pro forma FY ,814 5,673 (2.4)% % % of revenue 10.2% 11.1% +0.9 pt % 11.6% FY 2008 FY 2009 Capex (tangible assets) Total self-funded R&D before credit tax % 5.9% Recorded as opex Activated expenses (In M) Revenue Recurring operating income One-off items Profit (loss) from op. % of revenue (In M) % of revenue 38 Change Organic Change (5.1)% Decrease in civil engines activities Unfavourable mix in OE CFM and weak CFM spares activity Strengths in services for military, helicopters & high trust engines Profits up resulting from a strong military activity in spares, a tight control of fixed costs & purchasing costs, significant productivity improvements and a favourable currency impact. R&D: tailing off of developments on SaM146 & decreasing in helicopters, while TP400 increasing

39 Aircraft Equipment Key figures (In M) Revenue Recurring operating income % of revenue One-off items Profit (loss) from op. % of revenue FY 2009 Change Organic Change 2,775 2,767 (0.3)% (4.8)% % 2.2% 2.6% +0.4 pt - (71) % ns FY 2008 (In M) FY 2009 Capex (tangible assets) Total self-funded R&D before credit tax % 5.1% Recorded as opex Activated expenses % of revenue 39 FY 2008 restated pro forma Strong deliveries of large nacelles (A320, A380) Sustained growth of services in landing systems, brakes and wheels Impact of business and regional jets crisis on Equipment activities (small nacelles, wiring and landing systems) Impairment charge and loss at completion on B787 landing systems Decreased R&D in A380 and A400M programs

40 Defence Key figures (In M) Revenue Recurring operating income % of revenue One-off item Profit (loss) from op. % of revenue (In M) FY ,021 Change Organic Change 1, % 3.0% 40 9 (77.5)% 3.9% 0.8% (3.1)pts % 0.8% FY 2008 FY 2009 Capex (tangible assets) Total self-funded R&D before credit tax % of revenue 11.2% 13.8% Recorded as opex Activated expenses FY 2008 restated pro forma Backlog of 2 years of sales Over 10% growth in Avionics Navigation programs Missile guidance programs Includes (35)M loss at completion on A400M navigation systems and significant cost increment to create Safran Electronics Growing R&D efforts

41 Security Key figures (In M) Revenue Recurring operating income % of revenue One-off item Profit (loss) from op. % of revenue FY % % 4.1% 6.1% 2.0pt % 6.1% FY 2008 (In M) Total self-funded R&D before credit tax % 7.0% Recorded as opex Activated expenses Change Organic Change 11.4% Strong organic growth (+11%) ID solutions (French biometric passports...) Scale effect on margins Includes PPA impact of (31)M in 2009 vs. (8)M in 2008 FY 2009 Capex (tangible assets) % of revenue 41 FY 2008 restated pro forma Impact of acquired companies: 204M in revenue and 21M in underlying profit from operations ( 52M before PPA)