roadshow may 2011 en final - safran2013: $3.9bn achieved at $1.30 to rise to $4.6bn at $1.30 as long...

Safran

Investors roadshow & conference

May 2011

Investors roadshow & conference - May 2011

2

2010 revenue by activities

Revenue €10,760MRecurring op. income €878M (8.2% of revenue)

Net income - Group share €508M (€1.27/share)

Free Cash Flow €934MNet cash position €24M

A tier-1 leader in Aerospace, Defence & SecurityFY 2010 key adjusted figures

A tier-1 equipment supplier providing high-technology & mission critical solutions

26 %

12 %52 %

10 %

Aircraft Equipment

DefenceAerospacePropulsion

Security


3

Recent changes in governance

AGM approved to replace the former dual structure by an unitary structure with a Board of Directors as of April 21, 2011

Membership structure of the Board of Directors15 members including 4 representatives of the French State, 5 independent members (out of them 2 international personalities) and 2 representatives of employees shareholders1 Board advisor

New management structureJP.Herteman - Chairman & CEO3 Deputy CEOs

• Dominique-Jean-Chertier - Corporate Office• Ross McInnes - Finance and risk management• Marc Ventre - Operations


4

Recent business highlights

Team-up with COMAC to provide C919 wiring systems

Supply of the complete integrated nacelle for the A320neo

powered by LEAP-X engine

Issued the 12-digit unique ID numbers for 4.5 million

residents in India

Morpho’s Explosive Detection Solutions meet EU Standard 3

requirements. A major milestone toward implementation across

European airports

Acquired SNPE Matériaux Energétiques

Key achievements

Creating a unified entity in solid rocket propulsion


5

5 key themes

Civil aftermarket and LEAP-X introduction

Productivity improvements in Equipment

External growth in Security

Currency hedging policy

Equity structure


6

Creating value from CFM56

0

5 000

10 000

15 000

20 000

25 000

30 000

35 000

82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12E 14E 16E 18E 20E

(Num

ber o

f CFM

engin

es)

Number of CFM engines

2010 : 20,000 engines / 500 million flight hours

2020 : 30,000 engines / 1,000 million flight hours

CFM56 spare parts revenue potentially to double by 2020


7

Significant strength in widebody engines services

GE90 fleet in service and global spares revenue ($)

0

100

200

300

400

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 20100

500

1 000

1 500

GE90 fleet

GE90 sparerevenue %

100 base year 2002


8

Introduction of LEAP-X

COMAC C919

Airbus A320neo


9

Improving productivity in equipmentWhile expecting higher volumes on new programs

Grow services (carbon brakes, landing systems, nacelles) as fleet usage continues to pick-up and as installed base continues to grow

Nacelle activity to provide positive contribution in 2011

Expected volume recovery from 2011 in business and regional jets

Continue to improve productivity and reduce cost base

Confident to deliver higher operating margin in Aircraft Equipment by 2012-2013

• Engine nacelles• Wheels & brakes

• Landing gear• Wiring• Power transmission

Worldwide leading positions


10

Secure ID documentsConsolidated since Sept. 2008

100% ownership (€325 m)

2008 2009

Fingerprint ID systemsConsolidated since April 2009


Tomography-based detection systemsConsolidated since Sept. 2009


4 strategic acquisitions in Biometric ID and Detection systems for a total cash-out of over €1.6bn

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

2010

HomeLand Protection

Biometrics & ID management solutions Closing pending CFIUS approval

100% ownership ($1,091 m)


11

Organic and acquisition-driven growth Fast-paced development of Security

0

200

400

600

800

1000

1200

2007 2008 2009 2010

Revenue from acquisitions (Printrak, GE HLP)Restated revenue at 2008 perimeter (excluding Monetel activity) and excluding contract in Ivory Coast

Average reported growthCAGR2007-10 = ~21%

Average organic growth CAGR2007-10 = ~15%

Revenue (€M) - Security

1,041

904

695

481


12

3.93.92.8

4.34.0

4.5~ 4.7~ 4.7~ 4.7

0

1

2

3

4

5

2009 2010 2011 2012 2013 2014

3-year hedging policySafran significantly increased hedge volumes for 2014

Hedge rates locked-in for 2011 to 2014

2012: $3.9bn achieved at $1.34 to rise to $4.6bn at $1.34as long as €/$<1.65 for most of 2011

2013: $3.9bn achieved at $1.30 to rise to $4.6bn at $1.30 as long as €/$<1.52 for most of 2011

2014: $2.8bn achieved at $1.30 through accumulators and forward sales to rise to $4.5bn at $1.28 as long as €/$<1.52 for most of 2011 and 2012

Hedge portfolio, May 9, 2011

1.34

1.34

1.30

1.28

1.30

1.30

1.381.441.42Achieved

Target

Estimated exposure needsIn US$ bn

€/$ hedge rate

Total: $13.8bn


13

-100

-50

0

50

100

150

200

250

300

350

400

3-year hedging policy

An estimated cumulative €400M tailwind in EBIT over the next 4 years

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

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

Material tailwind in profitability expected over 2011-2014

102134

(44)

75

1.42

1.44

1.38

1.30

2009 2011E 2012E

1.34

2013E 2014E

108

1.28

2010

200

100

0

-100

EBIT impactvs. previousyear (in €M)

1.2

1.3

1.4

1.1

1.35

1.25

1.15

1.05

1

€/$hedge

rate

300

56


14

As of Dec. 31, 2009

French State30.2%

Areva7.4%

Public38.1%

Treasury shares4.2% Employees

20.1%

Equity shareholdingFree float increased by 9.8 points over 15 months

As of April 30, 2011

French State30.2%

Areva2.0%

Public47.9%

Treasuryshares3.3%

Employees16.6%


15

Note: 2011 outlook does not include any contribution from L-1 Identity Solutions and SNPE Matériaux Energétiques

Revenue expected to increase by at least 5%at an estimated average spot rate of USD 1.33 to the Euro

Recurring operating income expected to increase by at least 20%at a hedge rate of USD 1.38 to the Euro

Free cash flow expected to represent about a third of the recurring operating income taking into account an expected increase in OWC and R&D investments

2011 outlook

[ Q1 2011 up 10.5% ]


16

Safran

Additional Information


17

Safran

FY 2010 Financials


18

FY 2010 financial highlightsSolid operating leverage

Growing revenue with strongperformance in Defence and Security

FY 09 FY 10

10,448 10,760+3.0%

Recurring operating income at 8.2% of revenue highlighting good control

of cost base

FY 10

729878+20%

Higher net profit (group share) at €1.27 per share

FY 09restated

FY 10

395508+29%

Net cash positive. Driven by better-than-expected WC

and very strong operating CFFY 09 FY 10

(498)

24

+€522 M

Proposed 2010 dividend up 32% vs. 2009

FY 09 FY 10

0.38

0.50+32%

(€M) (€M) (€M)

(€)

(€M)

FY 09restated


19

FY 2010 income statement

Of which cost of net debt of €(36)M

3760.94

(174)(98)

(4)(14)

3

6636.3%

6986.7%

10,448

FY 2009reported

5081.27

3950.99

Profit - group shareBasic EPS* (in €)

(168)(173)

(5)(20)

9

(174)(108)

(4)(16)

3

Net finance (cost) incomeIncome tax expenseProfit (loss) from discontinued op.Minority interestsShare in profit from associates

8658.0%

6946.6%

Profit from operations% of revenue

8788.2%

7297.0%

Recurring operating income% of revenue

10,76010,448Revenue

FY 2010FY 2009restated(In €M)

EPS growth of 28%

* Based on 399,552,920 shares

Effective tax rate of 25%


20

(3)179182Capitalized expenses

(50)458508Recorded as operating expenses

(0.7)pt5.9%6.6%% of revenue

(7.7)%637690Total self-funded R&D(before tax credit*)

ChangeFY 2010FY 2009(In €M)

(159)406565Ebit impact after R&D tax credit *

(133)530663Ebit impact before R&D tax credit *

(83)72155Amortisation / depreciation

(50)458508Recorded as operating expenses

ChangeFY 2010FY 2009(In €M)

Research & Development

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

Tailing off of R&D developmentson SJ100, A400M and B787

Increasing R&D developments on LEAP-X engine as well as A350 program

Tax credit* impact of €124M in 2010vs. €98M in 2009

* “Crédit Impôt Recherche” in France & Canada

R&D effort maintained, lower impact on EBIT

Of which €71M impairment charge on B787 in 2009


21

Aerospace Propulsion

Mild decline in revenue

Growth in services for military, helicopters & high trust engines

Lower OE deliveries (military, helicopters, high thrust engines)

Soft but improving CFM aftermarket

Growing profits despite CFM aftermarket softness

Aftermarket (military, high trust engines)

Impact of better OE CFM unit revenue

Productivity improvements

Slight adverse currency effect

R&D: tailing off of SaM146 and TP400; increasing efforts on LEAP-X

102145Capex (tangible assets)

9884Capitalized expenses

233252Recorded as opex

5.9%5.9%% of revenue

331336Total self-funded R&Dbefore tax credit

FY 2010FY 2009(In €M)

-29One-off items

+0.7pt11.8%11.1%% of revenue

5.6%663628Recurring operating income

11.8%

663

5,604

FY 2010

(1.2)%

Change

(3.1)%5,673Revenue

11.6%% of revenue

657Profit (loss) from op.

Organic Change

FY 2009restated(In €M)

Key figures


22

Aircraft Equipment

Revenue back to growth

Driven by new programs (B787) and stabilization in business and regional jets segment

Offset by lower nacelle activity

1-month consolidation of HCM

Recovery plan delivering results

Drastic reduction of losses in nacelles (reached operating breakeven in Q4 2010)

A 380 : lower volumes, improved production costs, commercial agreement with Airbus

B 787 : higher volumes, commercial agreement with Boeing

Repair & Overhaul on landing systems






FY 2010FY 2009(In €M)

(2) (71)One-off items

+1.9pt4.5%2.6%% of revenue

74%12773Recurring operating income

4.4%

125

2,834

FY 2010

2.4%

Change

Flat2,767Revenue

ns% of revenue


Organic Change


Key figures


23

Defence

Over 30% growth in Optronics with a favourable volume/price impact on profits

Felin, long-range IR goggles, thermal cameras, …

Avionics: mild decline in revenue, impacting profits in flight control systems

Further incremental costs to put in place Safran Electronics






FY 2010FY 2009(In €M)

--One-off items

+3.6pts4.4%0.8%% of revenue


4.4%

55

1,240

FY 2010

16.9%

Change

12.4%1,061Revenue

0.8%% of revenue


Organic Change


Key figures

Of which €(35)M loss at completion on A400M

navigation systems in 2009


24

(4) -One-off items

+2.8pts12.3%9.5%% of revenue


11.9%

124

1,041

FY 2010

15.2%

Change

(6.0)%904Revenue

9.5%% of revenue


Organic Change


Security

Revenue and profit growth benefited from acquisitions (mainly detection)

Adverse impact in 2010 of anticipated lower revenue of Identification government contract in Ivory Coast now tailing off

Except Ivory Coast :

Organic revenue growth (+7%)

Very good performance for Identification (Albania, Mexico, Kazakhstan) and smart cards activities (volume, improved production costs)

Continued investment in India

MorphoDetection delivered results in line with initial targets


18-Capitalized expenses




FY 2010FY 2009(In €M)

Key figures


25

(in €M)

(498)

317

Dividend

1,142(251)

Net cash position

Cash flow from operations is 1.30x EBIT

Dividend to parent holders was €152M (€0.38 per share)

€100M cash-out for the HCM acquisition

Net debt at Dec 31, 2009

Cash flowfrom ops

Others

Net cash at Dec 31, 2010

Change in WC

Tangible & Intangible

Capex

€934M Free Cash Flow

(161)

24

Preserving our financial flexibility

(525)

o/w €(100)M HCM acquisition


26

Safran

Q1 2011 Financials


27

Q1 2011 financial highlightsSolid revenue growth

Q1 2010 Q1 2011

2,426

2,681

(€M)

+10.5%

Healthy recovery in civil aftermarket (+12.3% in $)Significant strength in widebody engine services

Lagging recovery in the narrowbody segment

Original equipment up 7% in aerospace (Propulsion and Equipment)

2-digit revenue contribution from:Equipment (nacelles)

Defence (optronics)


28

Q1 2011 revenue

10.5%

na

4.5%

19.2%

15.2%

8.5%

Change

reported

2,681

4

233

292

729

1,423

Q1 2011

na14Others

2.3%223Security

7.1%2,426Total revenue

15.1%245Defence

9.8%633Aircraft Equipment

6.0%1,311Aerospace Propulsion

Change

organicQ1 2010Adjusted data

(in €M)

Main drivers

Civil aftermarket as well as services for helicopters engines

Nacelles (A380, regional jets)

Contribution of Labinal Salisbury

50%+ growth in Optronics driven by program revenue recognition

Security

7% organic growth excluding Ivory Coast impact

Mix and regulatory pricing pressure in detection specific to this quarter

Positive growth across all businesses


29

-

(4)%

166%

57%

322

199

24

94

324

207

9

60

Number of deliveries

1. CFM56 engines

2. Helicopter engines

3. A380 nacelles

4. Small nacelles (biz & regional jets)

Aerospace OE

21,144

58.0%

Q1 2011

4.8%

3.1 pts

20,173

54.9%

Total installed base

Share of 2nd gen. engines

ChangeQ1 2010CFM56 engines

7.5%1,1791,097OE revenue* Prop. & Equipment (in €M)

Increased share of 2nd generation CFM engines in fleet

future flow of high value services

1. Stable CFM56 deliveries

2. Some stabilization in helicopters

3. Ramp up of Airbus A380 deliveries

4. Improvement of the regional jets segment

* Including revenue from R&D contracts and miscellaneous

OE growth driven by new programs


30

PropulsionCivil aftermarket up 12.3% in $

Improvement in worldwide CFM56 spare part revenue (+6.3% in $ vs. Q1 2010); stronger growth expected in the latter part of the year

Significant strength in high thrust widebody engine spares (e.g. GE90 on B777)Good contribution from helicopter and military engines aftermarket

EquipmentGrowth mainly driven by landing systems activity as installed base continued to grow

* Including spares and maintenance & repair activities

Aerospace services

14.9%973847Total services revenue

8.3%(2.1)pts

23532.3%

21734.4%

Aircraft EquipmentServices share of total revenue

73851.8%

Q12011

17.1%3.6pts

63048.2%

Aerospace PropulsionServices share of total revenue

ChangeQ1 2010

Services* revenue(in €M)

Healthy recovery in civil aftermarket


31

Safran

Conclusion


32

Safran

Questions & Answers


33

roadshow may 2011 en final - safran2013: $3.9bn achieved at $1.30 to rise to $4.6bn at $1.30 as long...

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