SAFRAN (EPA:SAF) - Safran : Strong start in 2019

Transparency directive : regulatory news

26/04/2019 07:00

PRESS RELEASE

Safran : Strong start in 2019

Paris, April 26, 2019

Adjusted data

- Revenue at Euro 5,781 million, up 36.9% on a reported basis
- Organic revenue growth of 12.6% in Q1 2019 driven by continued momentum in
  Propulsion, Equipment and Defense activities
- Progressive recovery of Aircraft Interiors on track, notably as Seats resumed
  organic growth
- Safran is ahead on its path towards full-year 2019 guidance

Consolidated data
- Revenue was Euro 5,845 million

Foreword

- All figures in this press release represent adjusted(1) data, except where
noted. Please refer to the definitions and reconciliation between Q1 2019
consolidated revenue and adjusted revenue. Please refer to definitions
contained in the Notes on page 7 of this press statement.

- Aerosystems and Aircraft Interiors (former Zodiac Aerospace activities) are
fully consolidated in Safran's financial statements from March 1, 2018.

- Organic variations exclude the changes in scope (notably the contribution of
Aerosystems and Aircraft Interiors in January and February 2019) and the
currency impacts for the period.

- 2019 outlook is established considering the full application of the new
IFRS16 standard.

Executive commentary

CEO Philippe Petitcolin commented: "Safran started 2019 very strongly with a
+12.6% organic growth in Q1 well balanced between all businesses. We stand
behind our customers and follow very closely the announcements regarding the
737 MAX in order to adapt if necessary".

Key figures for Q1 2019

- Adjusted revenue in Q1 2019 was Euro 5,781 million compared with Euro 4,222
million in Q1 2018, an increase of 36.9% on a reported basis which included a
positive scope impact of Euro 802 million and a positive currency impact of
Euro 223 million.

- Adjusted revenue grew 12.6% organically, thanks to a strong momentum in
Propulsion, Equipment and Defense activities.

- Q1 2019 civil aftermarket(2) increased 10.2% in USD terms driven notably by
spare parts sales for second generation CFM56 engines.

- Safran is ahead on its path towards full-year 2019 guidance:
  o The organic performance of the Group is trending above full-year guidance
    for the first months of 2019;
  o The impacts in 2019 of the 737 Max situation are closely monitored: Safran
    will adjust its production plan if necessary.

Key business highlights for Q1 2019

Narrowbody engines deliveries
Combined deliveries of CFM engines (LEAP and CFM56) increased by 15.9% to 577
units in Q1 2019 from 498 units in Q1 2018.

LEAP program
424 LEAP engines were delivered in Q1 2019 compared with 186 units in the year
ago period. Regarding the adjustments to the 737 MAX production system
announced by Boeing, CFM has maintained the production rate for the LEAP-1B at
this point and will undertake temporary adjustments if necessary.

CFM56 program
CFM56 deliveries reached 153 units in Q1 2019 compared with 312 in Q1 2018,
reflecting the planned production ramp down.

Helicopter turbines
Safran and CHC Helicopter signed a four-year MRO contract to support Arriel
engines.

Carbon brakes
Safran signed several carbon brakes contracts, notably with Air India for 27
A320neo and Westjet for 10 Boeing 787.

Aircraft Interiors
In Cabin, Safran recorded several new contracts and was selected notably by:

- A major Asian airline to provide galleys for its future Boeing 777-9
- A European and a Middle East airlines to provide galleys for their A330
- A major European airline to retrofit its fleet of Airbus single-aisle
aircraft with Ecos bins (Safran latest generation of bins)

Seats also logged orders with airlines including:
- The selection by a major Asian airline to provide Business class, Premium
Economy class and Economy class seats for a 787 linefit order
- The selection by Air France to provide Business class for a 777 retrofit
project
- The selection by Corsair to provide Premium Economy class and Economy class
seats for an A330 linefit order

Defense
Safran won the fifth contract in a row for European Southern Observatory's
Extremely Large Telescope.

First-quarter 2019 revenue

Q1 2019 revenue amounted to Euro 5,781 million compared with Euro 4,222 million
in the year ago period. This represents an increase of 36.9%, or Euro 1,559
million.

Changes in scope had a contribution of Euro 802 million, of which Euro 781
million related to the acquisition of Aerosystems and Aircraft Interiors, and
Euro 21 million related to the acquisition of the ElectroMechanical Systems
activities of Collins Aerospace.

The net impact of currency variations amounted to Euro 223 million, mainly
reflecting a positive translation effect on non-Euro revenues from the USD (the
average EUR/USD spot rate was 1.14 in Q1 2019, compared with 1.23 in Q1
2018).

On an organic basis, revenue increased 12.6%, as all activities contributed
positively.

Revenue (EURM) Q1 2018   Q1 2019   Organic  Impact of    Currency  Reported
                                    growth  changes in    impact    growth
                                              scope
Propulsion      2,286      2,735     14.8%      -          4.8%      19.6%
Aircraft
Equipment       1,263      1,458      9.2%      -          6.2%      15.4%
Defense           298        360     11.1%    7.0%         2.7%      20.8%
Aerosystems and
Aircraft
Interiors*        369      1,225     13.3%     ns           ns         ns
Of which
Aerosystems        na       587       na       na           na         na
Of which
Aircraft
Interiors          na       638       na       na           na         na
Holding
& Others            6         3       na       na           na          na
Safran           4,222     5,781    12.6%    19.0%         5.3%      36.9%

Currency hedges
Safran's hedging portfolio totalled USD 27.4 billion at April 12, 2019. The
Group net exposure is estimated at USD 9.4 billion in 2019 and should reach USD
10.0 billion in 2022 due to the growth outlook for the businesses with USD
denominated revenue.

2019: the net exposure of USD 9.4 billion is now fully hedged at a targeted
hedge rate of USD 1.18 (unchanged)
2020: the firm coverage of the estimated net exposure increased to USD 6.5
billion (compared with USD 6.0 billion in February 2019). No change in the
range of the targeted hedge rate of USD 1.16 to USD 1.18.
2021: the firm coverage of the estimated net exposure amounted to USD 8.0
billion (unchanged). No change in the range of the targeted hedge rate of USD
1.15 to USD 1.18.
2022: the Group increased the coverage of the net exposure to USD 3.5 billion
(compared with USD
2.5 billion in February 2019). No change in the range of the targeted hedge
rate of USD 1.15 to USD 1.18.

Update on the share buyback program

In May 2017, Safran announced its intention to implement a Euro 2.3 billion
ordinary share buyback program to run over the two years following the
completion of the tender offer for Zodiac Aerospace shares.
At December 31, 2018,  Safran  had  already  purchased  11.4  million  shares
for  a  total  of  Euro 1.22 billion. Following up on the decision of the Board
of Directors, these 11.4 million treasury shares were cancelled on December 17,
2018.

On January 10, 2019, Safran entered into an agreement with an investment
service provider for a follow-on repurchase tranche. Safran will acquire up to
Euro 600 million worth of ordinary shares no later than May 10, 2019. The unit
price may not exceed the maximum of Euro 140 per share set by the November 27,
2018 shareholders' meeting. From January 10, 2019 to April 24, 2019, Safran
repurchased a total amount of Euro 342 million worth of shares.

Ahead on its path towards full-year 2019 guidance

Safran is ahead on its path towards full-year 2019 guidance:

- The organic performance of the Group is trending above full-year guidance for
the first months of 2019;
- The impacts in 2019 of the 737 MAX situation are closely monitored: Safran
will adjust its production plan if necessary.

The outlook is based on assumptions which are globally unchanged compared with
the FY 2018 earnings announcements on February 26, 2019. The assumption related
to the negative impact coming from the CFM56-LEAP transition on Propulsion
adjusted recurring operating income will be adjusted in due time to take into
account the latest developments of the 737 MAX and the overall demand for spare
engines.

Business commentary for Q1 2019

- Aerospace Propulsion

Q1 2019 revenue was Euro 2,735 million, up 19.6% compared to Euro 2,286 million
in the year-ago period. On an organic basis, revenue increased 14.8%, driven by
narrowbody engines and military OE, as well as by continuing momentum in
services.

OE revenue was up 19.6% (or 14.8% organically) in Q1 2019. The total number of
narrowbody engines deliveries increased 15.9% from 498 to 577 engines, driven
by LEAP production ramp up. LEAP shipments grew to 424 engines in Q1 2019 from
186 in Q1 2018, while CFM56 volumes ramped down to 153 engines in Q1 2019 from
312 in Q1 2018. M88 engines deliveries reached 8 units in Q1 2019 compared with
3 units in Q1 2018. Helicopter turbines OE sales also contributed to growth
thanks to higher volumes.

Service revenue was up 19.7% in Euro terms (or 14.9% organically) and
represented a 58.5% share of Q1 2019 sales. Organic growth was driven by civil
aftermarket activities, helicopter turbines services and military support
activities.
Civil aftermarket grew 10.2% (in USD terms) in Q1 2019, due to the continued
strength of spare parts sales for second generation CFM56 engines.

- Aircraft Equipment

Q1 2019 revenue amounted to Euro 1,458 million compared to Euro 1,263 million
in the year-ago period. On an organic basis, revenue was up 9.2%.

OE revenue grew 14.9% (8.4% organically) in Q1 2019, mainly driven by rising
volumes of nacelles. Deliveries of nacelles for LEAP-1A powered A320neo ramped
up to reach 120 units in Q1 2019 (66 units in Q1 2018). A330neo nacelles
amounted to 24 units in Q1 2019 as shipments began in Q3 2018. Higher sales of
equipment (landing gear and wiring) for 787 and A350 also contributed to OE
growth. The planned reduction in assembly rate of A380 was a headwind: 4
nacelles were delivered in Q1 2019 compared with 16 in the year-ago period.

Service revenue was up 16.5% (10.9% organically), driven by the growing
contribution of carbon brakes and MRO activities for landing gear, as well as
the continuing momentum in nacelles support activities.

- Defense

Q1 2019 revenue was Euro 360 million, up 20.8% compared to Euro 298 million in
the previous year. On an organic basis, revenue increased by 11.1%.

Growth in military sales was driven by increases in sighting systems and in
portable optronics. Avionics revenue was also up thanks to electronics (FADEC
for LEAP) and support activities.

- Aerosystems and Aircraft Interiors (former Zodiac Aerospace activities that
are consolidated since March 1st, 2018)

Revenue of Aerosystems and Aircraft Interiors was Euro 1,225 million compared
with Euro 369 million in Q1 2018, including a two-month positive impact of
change in scope of Euro 781 million.

Organic growth, at 13.3%, was not fully representative of the expected annual
trends: it reflected the strong increase in activity, notably of Aircraft
Interiors, over a one-month period (that is in March 2019 compared with March
2018). Safran confirms that 2019 should be a transition year for Aircraft
Interiors sales as time is required to translate orders into stronger growth.

Aerosystems recorded revenue of Euro 587 million in Q1 2019. Compared with
previous year quarterly performance, organic growth was driven by Fuel and
Control systems, Safety systems as well as by the good momentum in Connected
Cabin sales.

Aircraft Interiors recorded revenue of Euro 638 million in the quarter.
Compared with the previous year quarterly performance, Cabin grew slightly,
while Seats resumed organic growth driven by the progressive recovery in sales
of business class seats.

Agenda
Annual general meeting      May 23, 2019
H1 2019 earnings            September 5, 2019
Q3 2019 revenue             October 31, 2019

Safran will host today a conference call open to analysts, investors and media
at 8:00 am CET which can be accessed at +33 (0)1 72 72 74 03 (France),
+44 (0) 207 194 3759 (UK) and +1 646 722 4916 (US) (access code for all
countries : 28269020#).

A replay will be available until July 25, 2019 at +33 1 70 71 01 60,
+44 203 364 5147 and +1 646 722 4969 (access code for all countries :
418839630#).

The press release, presentation and consolidated financial statements are
available on the website at www.safran-group.com.

Key figures

The data shown for Q1 2018 include 1 month of activity for Aerosystems and
Aircraft Interiors (former Zodiac Aerospace activities).

Segment breakdown of     Q1 2018   Q1 2019  % change  % change
adjusted revenue                                       organic
(In Euro million)

Aerospace Propulsion      2,286      2,735    19.6%      14.8%
Aircraft Equipment        1,263      1,458    15.4%       9.2%
Defense                     298        360    20.8%      11.1%
Aerosystems and
Aircraft Interiors          369      1,225     x3.3      13.3%
Of which Aerosystems         na        587       na         na
Of which Aircraft
Interiors                    na        638       na         na
Holding & Others              6          3       na         na
Total Group               4,222      5,781    36.9%      12.6%

Euro/USD rate              Q1 2018              Q1 2019
Average spot rate            1.23                 1.14
Spot rate (end of period)    1.23                 1.12
Hedged rate                  1.18                 1.18

Notes

(1) Adjusted revenue
To reflect the Group's actual economic performance and enable it to be
monitored and benchmarked against competitors, Safran prepares an adjusted
revenue.

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,

First-quarter 2019 reconciliation between consolidated revenue and adjusted
revenue

Q1 2019                   Hedge accounting           Business
                                                   combinations

                                               Amortization          Adjusted
                                      Deferred  intangible    PPA    revenue
       Consolidated  Remeasurement  hedging gain  assets-   impacts-
         revenue      of revenue       (loss)      Sagem-    other
(In Euro                                           Snecma  business
million)                                                  combinations

Revenue   5,845          (64)            -           -         -       5,781

(2) Civil aftermarket (expressed in USD)
This non-accounting indicator (non-audited) comprises spares and MRO
(Maintenance, Repair & Overhaul) revenue for all civil aircraft engines for
Safran Aircraft Engines and its subsidiaries and reflects the Group's
performance in civil aircraft engines aftermarket compared to the market.

Safran is an international high-technology group, operating in the aircraft
propulsion and equipment, space and defense markets. Safran has a global
presence, with more than 92,000 employees and sales of 21 billion euros in
2018. Working alone or in partnership, Safran holds world or European
leadership positions in its core markets. Safran undertakes Research &
Development programs to meet fast-changing market requirements, with total R&D
expenditures of around 1.5 billion euros in 2018.

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 / Follow @Safran on Twitter

Press
Catherine MALEK : catherine.malek@safrangroup.com / T +33 (0)1 40 60 80 28

Investors Relations
Cécilia MATISSART : cecilia.matissart@safrangroup.com /
T +33 (0)1 40 60 82 46
Frédéric LUCAND : frederic.lucand@safrangroup.com / T +33 (0)1 40 60 82 19
Jean-François JUERY : jean-francois.juery@safrangroup.com /
T + 33 (0) 1 40 60 27 26

IMPORTANT ADDITIONAL INFORMATION

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; and
the risks described in the registration document (document de référence). 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.

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