q3 2010 revenue en
TRANSCRIPT
October 22, 2010
Third-quarter 2010 revenue
Jean-Paul HERTEMANCEO
Ross McINNESCFO
Safran
Q3 revenue 2010 - October 22, 2010
2
Q3 2010 business highlightsKey strategic moves & key wins
Aerospace Propulsion
Aircraft Equipment Security
DefenceJV with Elbit Systems for tactical unmanned aircraft systems
Acquisition of Harvard Custom Manufacturing (Electrical wiring systems)
Decision to merge Messier-Dowty, Messier-Bugattiand Messier Services
Agreement to acquire SNPE Matériaux Energétiques (SME)
Morpho and Mahindra Satyamselected to implement and deliver the Aadhaar program by UIDAI (Unique Identification Authority of India)
Entered into definitive agreement for the acquisition of L-1 Identity Solutions
Q3 revenue 2010 - October 22, 2010
3
Q3 2010 financial highlightsSolid revenue growth
Q3 2009 Q3 2010
2,384
2,593
(€M)
+8.8%
2-digit revenue contribution from:Equipment (wiring & landing systems - B787)
Defence (notably Optronics)
Security (across all businesses)
Mild decrease in Aerospace PropulsionInflexion point in CFM spares?(CFM56 spares down yoy, but up 16% sequentially)
Aftermarket up, except for CFM56
Lower OE deliveries (helicopters, CFM56)
Tailwind from Fx ($, CAD, AUS$)
Q3 revenue 2010 - October 22, 2010
4
(8)%
(19)%
(26)%
(2)%
294
163
17
89
321
201
23
91
Number of deliveries
1. CFM56 engines
2. Helicopter engines
3. A380 nacelles
4. Small nacelles (biz & regional jets)
Aerospace OE
20,570
55%
Q3 2010
5%
3pts
19,509
52%
Total installed base
Share of 2nd gen. engines
ChangeQ3 2009CFM56 engines
6.4%1,1121,045 **OE revenue* Prop. & Equipment (in €M)
Increased share of 2nd generation CFM engines in fleet
future flow of high value services
1. Lower CFM56 deliveries: one-off impact from flood in factory (Poland)
2. Impact of decline in small helicopters
3. Impact of Airbus A380 deliveries delay
4. Stabilization of the business & regional jets segments
* Including revenue from R&D contracts and miscellaneous** Restated to include leases in Services
OE growth mainly driven by Fx spot rate
Q3 revenue 2010 - October 22, 2010
5
Services revenue driven by engines aftermarket despite CFM spares sales softness
Continued good performance in services to military customers (aircraft and helicopters)
Growth in high thrust widebody engine spares (e.g. GE90 on B777)
Mild transition in CFM56 spares (-16% in $ vs. Q3 2009, +16% vs. Q2 2010)
* Including spares and maintenance & repair activities** Restated to include leases
Aerospace services
0.7%913907Total services revenue
-(4.2)pts
20229.0%
20233.2%
Aircraft EquipmentServices share of total revenue
71153.5%
Q32010
0.9%1.0pt
70552.5%
Aerospace PropulsionServices share of total revenue
ChangeQ3 2009 **
Services* revenue(in €M)
Resilient total services revenue
Q3 revenue 2010 - October 22, 2010
6
Safran
Q3 2010 Financials
Q3 revenue 2010 - October 22, 2010
7
All revenue figures in this presentation represent Adjusted revenue (see annex for bridge with consolidated revenue)
To reflect the Group’s actual economic performance and enable it to be monitored and benchmarked against competitors, Safranprepares an adjusted income statement alongside its consolidated financial statements.
Particularly, Safran recognizes, all changes in the fair value of its foreign currency derivatives in “financial income (loss)”, in accordance with the provisions of IAS 39 applicable to transactions not qualifying for hedge accounting.
Accordingly, Safran’s consolidated income statement is adjusted for the impact in financial income (loss) 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 hedging rate, i.e., including the costs of the hedging strategy;
§ The recognition of the mark-to market of unsettled hedging instruments at the closing date is neutralized.
ForewordDefinitions
Q3 revenue 2010 - October 22, 2010
8
Fx volatility
Increased Fx volatility during Q3 2010
Translation effect: foreign currencies translated into €⇒ Impact on Revenue and Return on Sales
Transaction effect: mismatch between $ sales and € costs is hedged⇒ Impact on Profits
Mark-to-market effect⇒ Impact on consolidated “statutory” accounts
Hedging management - continuing policy
Capturing better rates to optimize portfolio
Rolling 3-year hedging policy
Diverse impacts on P&L
Hedge rate
$ 1.44$ 1.43Q3 2010Q3 2009
Average spot rate
$1.29$1.43Q3 2010Q3 2009
Spot rate
$ 1.36$ 1.46Sept. 30, 2010Sept. 30, 2009
Q3 revenue 2010 - October 22, 2010
9
Q3 2010 revenue
8.8%
na
35.4%
29.6%
14.5%
(1.1)%
Change
reported
2,593
9
279
280
696
1,329
Q3 2010
na10Others
4.7%206Security
0.5%2,384Total revenue
18.0%216Defence
7.6%608Aircraft equipment
(6.0)%1,344Aerospace propulsion
Change
organicQ3 2009Adjusted data
(in Euro million)
Positive impacts
Aftermarket for military, helicopters and high-thrust engines
B787 wiring & landing systems
2-digit growth in Optronics
Contribution of Morpho Detection
Negative impacts
Weak CFM56 spares vs. Q3 ’09, higher vs. Q2 ’10
Timing of CFM56 OE deliveries
Growing by 8.8%
Q3 revenue 2010 - October 22, 2010
10
Q3 2010 revenue
Q3 2010Currency impact
(spot rate)
Q3 2010at Q3 2009 perimeter
Acquisitions & activities newly consolidated
Q3 2009
(In €M)
2,384 2,396
2,508
0.5%organic
Organic variation
Q3 2010 at constant
Q3 2009 perimeter and exchange rate
2,593
12
112
85
0.5% organic growth
+8.8%
Q3 revenue 2010 - October 22, 2010
11
9m 2010 revenue
3.4%
na
18.4%
15.3%
2.4%
(0.5)%
Change
reported
7,790
32
758
838
2,070
4,092
9m 2010
na32Others
(10.3)%640Security
(1.4)%7,533Total revenue
11.7%727Defence
(0.9)%2,021Aircraft equipment
(2.6)%4,113Aerospace propulsion
Change
organic9m 2009Adjusted data
(in Euro million)
Trends in line with FY 2010 expectations for stable revenue
Q3 revenue 2010 - October 22, 2010
12
3-year hedging policy
Hedge portfolio, Oct 15, 2010
1.34
1.34
-
-
1.30
1.31
1.39
-
1.44
-
1.42
-
Achieved
Target
In US$ bn 2010: $1.44 now achieved
2010 & 2011 net exposure revised downwards to reflect improved $ cost base
(*) 2012: $3.1bn achieved at $1.34 to rise to $4.5bn at $1.34as long as €/$<1.65 for the balance of 2010 and most of 2011
€/$ hedge rate
Safran continued to optimize its hedging portfolio
Total: $12.6bn
3.63.1
4.3 4.4 4.65.05.05.0
0
1
2
3
4
5
2009 2010 2011 2012 2013 2014*
Q3 revenue 2010 - October 22, 2010
13
Safran
Conclusion
Q3 revenue 2010 - October 22, 2010
14
As of Dec. 31, 2009
French State30.2%
Areva7.4%
Public38.1%
Treasury shares4.2% Employees
20.1%
Equity shareholdingFree float increased by 8.5 points over 9 months
As of Oct. 12, 2010
French State30.2%
Areva2.0%
Public46.6%
Treasuryshares4.2%
Employees17.0%
Following a 5.4% stake disposal by Areva
Q3 revenue 2010 - October 22, 2010
15
2010 outlook is confirmed
Revenue expected to be similar to 2009
Recurring operating margin expected to trend towards the 8% range(at a targeted hedge rate of USD1.44 to the Euro)
Free cash flow expected to represent at least half of the recurring operating income(assuming that French MoD payment delays are significantly resorbed)
Underlying assumptionsA 5%+ increase in global air traffic
A stabilization in original equipment commercial aviation business
A moderate growth in sales in aerospace services, back ended (H2 2010)
Strong and profitable growth for the Security business
On-going Safran+ plan to enhance profitability and reduce overheads
Q3 revenue 2010 - October 22, 2010
16
Safran
Questions & Answers
Q3 revenue 2010 - October 22, 2010
17
Q3 & 9m 2010 consolidated and adjusted revenue
PPA impacts -other business combinations
Amortization of intangible assets -
Sagem/Snecma
N/A 2,593N/A-(86)2,679Revenue
Deferred hedging
gain (loss)
Re-measurement of
revenue
Adjusted consolidated
income statement
Business combinationsHedge accountingConsolidated
income statement
Q3 2010(In €M)
PPA impacts -other business combinations
Amortization of intangible assets -
Sagem/Snecma
N/A 7,790N/A-(256)8,046Revenue
Deferred hedging
gain (loss)
Re-measurement of
revenue
Adjusted consolidated
income statement
Business combinationsHedge accountingConsolidated
income statement
9m 2010(In €M)
Q3 revenue 2010 - October 22, 2010
18