June 2010 roadshows EN Final - Safran€¦ · • Power transmissions • Engine modules and components • Composite engine parts Engines • CFM56 family (50/50 with GE) • SAM146

Safran

Investors roadshow

Europe & North America June 2010

2Investors roadshow - June 2010

Safran

An international high-technology groupTier-1 equipment supplier


2009 revenue by activities

26%

10%54%

Aircraft Equipment

DefenceAerospacePropulsion

Security

Holding

9%

1%

Revenue 10,448 M€Recurring operating income 698 M€Net income - Group share 376 M€ (€0.94/share)

Free Cash Flow 818 M€Net cash (debt) (498) M€ (11% gearing)

A tier-1 leader in Aerospace, Defence & SecurityFY 2009 Key figures


• Engine nacelles• Wheels & brakes

• Landing gear• Wiring• Power transmission

• Biometric and ID solutions• Helicopter Flight Control

• Detection

• Inertial navigation systems• Optronic systems: #1 Europe• Military Engine

• Space Propulsion

• Single aisle aero-engine• Helicopter aero-engine

Aerospace Propulsion Aircraft Equipment Defence and Security

Leading market positionsBusinesses with high technological barriers to entry


NacellesNacelles and components(thrust reversers,…)

Engine equipment and parts• Integrated engine control systems • Power transmissions• Engine modules and components• Composite engine parts

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

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

Aircraft Equipment• Network server systems• Back-up flight control• Secure data link• Cockpit control systems• Electrical wiring systems• Aircraft condition monitoring systems

Engine services• Maintenance, repair and overhaul• Engine testing and test equipment

• Composite aerostructures• Auxiliary power units• Hydraulic systems• Sensors and actuators• Ventilation/filtration• Inertial references

A tier-1 supplier in aerospaceWhat do we do


RENEWAL

UNTIL

2040Nacelles

July 2008

(LEAP-X)

RichardNixon

Georges Pompidou

CFM56

SAFRAN / GE PARTNERSHIP RENEWEDUNTIL

2040

Next generation engines

RichardNixon

Georges Pompidou

RichardNixon

Georges Pompidou

June 1973

CFM56 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

Services

Successful CFM partnershipsCFM56, the best selling civil engine ever


0

5 000

10 000

15 000

20 000

82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 090

100

200

300

(num

ber o

f en

gine

s)

(cha

nge

in g

loba

l CFM

56 s

pare

s re

venu

e)

Base

Gulf

Iraq

Global spare parts revenue (in $ - 100 base in 2000)

Year2000

war

9/11 2001

war

CFM engines

Start of maintenance servicesfor new, long lasting models

Over 5-year backlog to date in CFM OEM (>6,000 engines)

Active installed base over 19K engines Outstanding fleet of CFM56 engines


Secure ID documentsConsolidated since Sept. 2008

100% ownership (€325 m)

HomeLand Protection

2008 2009

Fingerprint ID systemsConsolidated since April 2009


Tomography-based detection systemsConsolidated since Sept. 2009


3 strategic acquisitions in Biometric ID and Detection systems for a total cash-out of €865 m

An attractive investment case consistent with our business modelSecurity becoming a strong third pillar


Aerospace Propulsion Aircraft Equipment Defence and Security

49%32%

Recurring revenues = services, upgrades, maintenance, consumables related to long-term contracts

Potential: 60% Potential: 45% Potential: 40%

15%

A resilient business mixSolid performance in an unsettled environment


As of May 31, 2010

56 %

French State30.2%

Areva7.4%

Public40.6%

Treasury shares4.2% Employees

17.6%

Equity shareholding$11.4bn market cap (May 31, 2010)


Safran

2009 Highlights


Growing revenue with strongperformance in Security (+38%)

FY 08restated

pro forma

FY 09

10,28910,448+1.5%

Recurring operating income at 6.7% of revenue highlighting good control

of cost base

FY 09

659

698+5.9%

Higher net profit (group share) at €0.94 per share

FY 08 FY 09

256

376+47%

Lower net debt despitesignificant acquisitions in Security.

Driven by strong CF and controlled WC FY 08 FY 09

(635)(498)

+€137 M

2009 dividend back to 2007 level

FY 08 FY 09

0.25

0.38+52%

(€M) (€M) (€M)

(€)

(€M)

FY 08restated

pro forma

2009 financial highlightsSolid performance in an unsettled environment


Reinforced our leadership in aviation propulsion20,000th 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)

2009 - Year in reviewKey strategic business achievements


19,823

53%

2009

6.7%

2 pts

18,565

51%

Total installed base

Share of 2nd gen. engines

Change2008CFM engines(On Dec. 31)

(5.8)%4,7715,063OE revenue* Prop. & Equipment (in €M)

Flat

(11)%

42%

(48)%

1,263

1,032

84

321

1,268

1,155

59

618

Number of deliveries

1. CFM56 engines

2. Helicopter engines

3. A380 nacelles

4. Small nacelles (biz & regional jets)

Increased share of 2nd generation CFM engines in fleet

future flow of high value services

1. 2009 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

* Including revenue from R&D contracts and miscellaneous

AerospaceAerospace OE impacted, but CFM workhouse continued at top rates


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

2.0%3,6693,596Total services revenue

1.6%0.6pt

88131.8%

86731.2%

Aircraft EquipmentServices share of total revenue

2,78849.2%

FY 2009

2.2%2.3pt

2,72946.9%

Aerospace PropulsionServices share of total revenue

ChangeFY 2008Services* revenue(in €M)

AerospaceResilient total services revenue


* Source : Safran

Grounded CFM-equipped aircraft represent 6% of the total CFM fleet

vs. 14% for the total active aircraft market*

Increasing number of B737 Classic aircraft being grounded or retired while B737NG and A320 returned to traffic

No significant new CFM56 order cancellations vs. 2008

Backlog at 6,000+ engines

795 new orders

77%

23%

1st CFM56 generation (-2, -3, -5A, -5C)

Dec 31, 2008364 aircraft

2nd CFM56 generation (-5B, -7)

91%

9%

Dec 31, 2009468 aircraft

Number of grounded planes equipped with CFM56 engines

AerospaceCFM fleet status: more 1st gen grounded but 2nd gen back in service


Favourable mix towards a higher proportion of 2nd gen. engines with higher material revenue per shop visit

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

Dec. 31, 2008

2,415

Dec. 31, 2009

CFM56 shop visits(total worldwide)

2,273

40%60% 52% 48%

Total -5.9%1st gen. CFM56 -17.0%

2nd gen. CFM56 +10.5%

Shop visit numbers are estimates; these can be revised marginally as airlines finalise reports

1st gen. 1st gen.2nd gen. 2nd gen.

AerospaceCFM services status: more 2nd gen revenues


Successful integration of Printrak and GE HLPWork initiated on commercial and cost synergies

Product and technology roadmap on trackFinger on the fly, face on the fly, CTX 9800, CTX5800

New significant contracts awardedID 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

SecurityCreating a strong franchise in security


A robust order intake leading to a record backlog of €2.1bnNew order for 16,454 Felin integrated equipment suites

A long term order of 3,400 inertial / laser-guided AASMair-to-ground weapons

Ramp-up of AASM and IR seekers deliveries

Very strong dynamic in optronicsNight vision goggles, thermal cameras…

Equipment for UK’s Ministry of Defence (FIST program) and US Army

Creation of Safran ElectronicsAs a centre of excellence for embedded electronics and software

DefenceRobust niches in defence matching asymmetric threat need


Overhead expenses Working Capital

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

Overhead expenses down 8% yoy, about €(100)M savings

Travel &reception

Consumable

Storage, handling & transportation

Repair &MaintenanceFees

Miscellaneous

Savings breakdown

Improving efficiency with Safran+Fast track to G&A and WC reduction


Of which cost of net debt of €(38)M

2970.73

(154)(123)(233)(15)

10

8127.9%

6666.3%

10,329

FY 2008 restated

3760.94

2560.63

Profit - group shareBasic EPS (in €)

(174)(98)

(4)(14)

3

(203)(101)(233)(15)

10

Net finance (cost) incomeIncome tax expenseProfit (loss) from discontinued op.Minority interestIncome from associates

6636.3%

8057.8%

7987.7%

Profit from operations% of revenue

6986.7%

6596.4%

6526.3%

Recurring operating income% of revenue

10,44810,28910,329Revenue

FY 2009FY 2008 restated

pro forma

FY 2008 reported

(In €M)

Non recurring cost of exit from Communications business

in 2008

Of which current tax expense of €(64)M

2009 income statementEPS growth of 49%


(46)182228Activated expenses

24504480Recorded as operating expenses

(0.2)pt6.6%6.8%% of revenue

(22)686708Total self-funded R&D(before credit tax*)

ChangeFY 2009FY 2008(In €M)

126565439Ebit impact after R&D credit tax*

121659538Ebit impact before R&D credit tax*

9715558Amortisation / depreciation

25504480Recorded as operating expenses

ChangeFY 2009FY 2008(In €M)

R&D effort maintained with normative trend at 6 to 7% of revenue

Tailing off of R&D developmentson SaM146 engine and A380 equipment

Credit tax* impact of €94M in 2009 vs. €99M in 2008

€(71)M depreciation charge impacted profit from operations

* “Crédit Impôts Recherche” in France

Research & DevelopmentOngoing structural high level of R&D


Hedge portfolio, Feb 22, 2010

1.29

1.35

1.33

1.35

1.39

-

1.47

1.46

1.42

-

Achieved

Target

Forward contractOthers (Stop loss, accumulators, options)

In US$ bn

Achieved a rate of $1.42 in 2009 (vs. $1.43)

2010: $1.47 achieved from $1.525; now aiming for $1.46

2011: $1.40 improved to $1.39

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

€/$ hedge rate

1.02.4

~4.34.3 4.44.8

0

1

2

3

4

5

2009 2010 2011 2012 2013

3-year hedging policyAiming to preserve profitability and results visibility


Currency impact on profitability is around 2/3rd in Propulsion and 1/3rd in Equipment; non material for Defence and Security businesses

Material tailwind expected in 2011 & 2012

Estimated impact on recurring operating incomeof targeted €/$ hedge rates

1,11

1,16

1,21

1,26

1,31

1,36

1,41

1,46

-100

-50

0

50

100

150

200

250

300

1.2

c.110

0

200

-100

EBIT impactvs. previousyear (In €M)

100

c.160

(80)

75

1.46

1.42

1.46

1.39

1.35

€/$hedge

rate

2008 2009 2010E 2011E 2012E

1.35

2013E

1.3

1.4

3-year hedging policyStrategy is to reduce future swings in profits


(in €M)

(635)(551)

53

218Dividend

Acquisitions

143

1,042

(585)

Net cash position of €53M before acquisitions

Strong FCF generation, with improved WC

WC improved by €218M despite lower revenues & application of new LME law on payables

Resumption of factoring of CFM receivables

Gearing of 11%

Net debt at Dec 31, 2008

Cash flow

Others

Net debtat Dec 31, 2009

Change in WC

Tangible & Intangible

Capex

(57)

€818M Free Cash Flow

Factoring of CFM

receivables

(73)

Net cashat Dec 31, 2009

before acquisitions

(498)

Net debtLower net debt despite €0.55 billion acquisitions


EIB loan - €300M, undrawn, maturity 2020; subject to 2 covenants (net debt/EBITDA <2.5 and Gearing <1; respectively 0.40 and 0.11 at Dec. 31, 2009)

Credit line - €800M, undrawn, maturity Jan. 2012; no covenants

Available financing resources:Committed & undrawn = €1.1bn

Gross debt repayment schedule(Dec. 31 , 2009)

454

100

130

170

67

67

116

121

744

116

867

1,087

<1 year 1 to 5 years >5 years

Syndicated credit facility

Spot credit

CP

Employee savings CP

Others

EIB

EIBEmployee savings CP

Bond

Others: 42

Finance leasesOthers: 5Bond - €750M, maturity Nov. 2014; 4% annual

coupon, no covenants

Successful inaugural bond issue 500

€1,250m

€1,000m

€750m

€500m

€250m

€0m

<1 year

Repaid on Jan. 15, 2010

Gross cash & debtThe Group is adequately funded


2,1265,418

722965

(498)

1,7565,219

7511,166(635)

GoodwillTangible & Intangible assetsOther non current assetsOperating Working CapitalNet cash (debt)

4,353148

1,7392,354

139

3,733141

1,4552,356

572

Shareholders’ equity - Group shareMinority interestsNon current liabilities (excl. net debt)ProvisionsOther current liabilities / (assets) net

FY 2009FY 2008(In €M)

Shareholders’ equity up by €620M

Goodwill up €370M (mainly GE HLP)

Net debt reduced by €137M

OWC reduced by €201M at €965M (9.2% of revenue)

Provisions remained stable

Balance sheet highlightsSolid balance sheet


Safran

Outlook


CFM56 spares to create strong value again

7,000+ second gen. engines yet to receive1st shop visit

Flying hours level +2% at ~42 million hoursin 2010; back to end 2007 level

However quarterly trends to remain volatile for next 12 months

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

0

100

200

300

400

2000 2013E05 06 07 08 2009 10E 11E

Global CFM spares revenue in $Base 100

12E04030201

Aftermarket trends in PropulsionGrowth to resume from H2 2010 onwards


In past decade, Safran gained marketshare on every new program

Increased shipset value (now visible)

Program delays and lower volume impact profitability over 2004-10

Expected future volume growth should at last positively impact margins

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

$4MPPPA350XWB

$4-5MPPPPB787

€6MPPPPA400M

$16-18MPPPA380

Equipmentshipset value

WiringWheelsbrakesMain LGNose LGNacelles

Margin recovery plan in EquipmentA 2 to 3-year robust plan


0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

2001 2004 2007 2009 2010

2009 employees54,900

France64%

(*) at comparable perimeter with 2009

Emergingzones

People

Purchases in $ / emerging zones

(BUY)

Production workforce in $ /emerging zones

(MAKE) $ zones

France72%

International28%

2005* employees50,800

International36%

Investing in high tech and capital intensive facilities in France (Montluçon, Bordes,

Massy, Bidos) bringing technological & productivity

step-change…

… while continuing to globalize our industrial footprint with opening of 2 new facilities in Mexico in 2010

0%

10%

20%

30%

40%

50%

2004 2005 2006 2007 2008 2009 2010 2011

Positioning for profitable growthContinuing to improve our cost base


Q1 2010 revenue: €2.43bn, -2.5% yoySolid 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 horizonRenewed 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

Q1 2010 highlightsRevenue in line with annual outlook


The Group expects revenue to be similar to 2009The 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 assumptionsA targeted hedged rate of USD1.46 to the Euro (currently at USD1.47)A forecast 4-5% increase in global air trafficA stabilization or slight decrease in original equipment commercial aviation businessA slight growth in sales of services, back ended (H2 2010)Strong and profitable growth for the Security businessOn-going Safran+ plan to enhance profitability and reduce overheads

2010 outlookRecurring operating income expected to increase over 2010


Growth in ServicesCFM spares revenue should double in 10 yearsMilitary, helicopters and high thrust engines to continue to grow

Profitable growth in SecurityStrong demand for our technologyLong term target: 20% of revenue & mid-teen operating margins

Favourable hedge ratesTargeting $1.35 for 2012 & 2013

Healthy prospects beyond 2010Key profitability growth factors


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 2010. 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 forward-looking 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, 2008. 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

Safe harborFor forward looking statements



Safran

Additional Information


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 developmentson SaM146 & decreasing in helicopters, while TP400 increasing

145238Capex (tangible assets)

84126Activated expenses

252257Recorded as opex

5.9%6.6%% of revenue

336383Total self-funded R&Dbefore credit tax

FY 2009FY 2008(In €M)

29-One-off items

+0.9 pt11.1%10.2%% of revenue

5.7%628594Recurring operating income

11.6%

657

5,673

FY 2009

(2.4)%

Change

(5.1)%5,814Revenue

10.2%% of revenue

594Profit (loss) from op.

Organic Change

FY 2008 restated

pro forma(In €M)

Aerospace PropulsionKey figures


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






FY 2009FY 2008(In €M)

(71)-One-off items

+0.4 pt2.6%2.2%% of revenue


ns

2

2,767

FY 2009

(0.3)%

Change

(4.8)%2,775Revenue

2.2%% of revenue


Organic Change

FY 2008 restated

pro forma(In €M)

Key figures Aircraft Equipment


Backlog of 2 years of sales

Over 10% growth in AvionicsNavigation 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






FY 2009FY 2008(In €M)

--One-off item

(3.1)pts0.8%3.9%% of revenue

(77.5)%940Recurring operating income

0.8%

9

1,061

FY 2009

3.9%

Change

3.0%1,021Revenue

3.9%% of revenue


Organic Change

FY 2008 restated

pro forma(In €M)

Key figures Defence


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

Impact of acquired companies:

€204M in revenue and €21M in underlying profit from operations (€52M before PPA)


--Activated expenses




FY 2009FY 2008(In €M)

-146 One-off item

2.0pt6.1%4.1%% of revenue


6.1%

55

904

FY 2009

38.0%

Change

11.4%655Revenue

26.4%% of revenue


Organic Change

FY 2008 restated

pro forma(In €M)

Key figures Security

Documents

June 2010 roadshows EN Final - Safran€¦ · • Power transmissions • Engine modules and components • Composite engine parts Engines • CFM56 family (50/50 with GE) • SAM146