Safran : 2019 Goldman Sachs Industrials Conference, London

SAFRAN

DECEMBER 2019

GOLDMAN SACHS 11TH ANNUAL

INDUSTRIALS CONFERENCE

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Disclaimer

• FORWARD-LOOKINGSTATEMENTS
  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.

• Safran - Goldman Sachs Conference - December 2, 2019

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SUMMARY

FY 2019

MID-TERM TRENDS

GREENING AVIATION

• Safran - Goldman Sachs Conference - December 2, 2019

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FY 2019

• Safran - Goldman Sachs Conference - December 2, 2019

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FY 2019

FY 2019 highlights

Very strong organic growth, across allbusinesses

• Organic growth for the first 9m of 2019: +12,6%
• Several programs in a ramp-up phase: nacelles (A320neo and A330neo); lavatories (A350); M88 (export contracts) etc.
• Services growth, notably civil aftermarket

FY 2019 Guidance*

FY 2019 revenue and recurring operating income outlook:

• Adjusted revenue to grow by around 15% in 2019 vs. 2018(1)
• Adjusted organicrevenue to grow by around 10%
• Adjusted recurring operating income to grow comfortably above 20%(2)

Some (positive) exceptional items boosted both recurring operating income and FCF

Aircraft Interiors: on going recovery

737MAX grounding weighted on FCF

• FCF impact: ~ €(650)/(700)M in 2019 including the advance payment received from Boeing in Q3

FY 2019 free cash flow outlook:

• Based on an assumption of return to service for Boeing 737MAX in Q4, FCF to be in the range 50% to 55% of adjusted recurring operating income as recurring operating income outlook has been raised
• In case the grounding continues until the end of 2019, FCF to adjusted recurring operating income should be around 50%

• Current impact on FCF and any extension merely represent a deferral in cash collection and should reverse

• Safran - Goldman Sachs Conference - December 2, 2019

• 2019 Guidance is established considering the full application of the new IFRS16 standard and is based on the Group's scope as of January 1, 2019 (Aerospace propulsion; Aircraft Equipment, Defense & Aerosystems; Aircraft Interiors ; Holding & Others).
  (1) At an estimated average spot rate of USD 1.13 to the Euro in 2019
  (2) At a hedged rate of USD 1.18 to the Euro

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Focus on CFM56-LEAP transition

CMD 2018

CFM56 / LEAP Original

Equipment (OE) contribution

on Gross margin

(1)

Today

As a reminder, what happened in 2018:

• (1) More CFM56 spare engines than originally anticipated
• (2) LEAP cost reduction trajectory in line with initial ambition
• All in all, transition impact was better than anticipated

2015

2016

2017

2018

2019e

2020e

2021e

2022e

Post

(2)

2022e

LEAP

CFM56

LEAP post 2022

LEAP Non-recurring costs

CFM56+LEAP (incl. Non-rec. Costs)

NB: chart presented at Safran 2018 CMD

FY2019 outlook: "overall negative impact on Propulsion adjusted recurring operating income variation in the range € 50 to 100 M"

FY2019 in the upper range of the initial guidance

• Spare engines: positive impact both for CFM56 and LEAP
• Non-recurringcosts (i.e. fleet management costs) reflecting the size of the fleet grew
• H2 better than H1 and cost reduction trajectory in line with ambition

• Safran - Goldman Sachs Conference - December 2, 2019

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MID-TERM TRENDS

• Safran - Goldman Sachs Conference - December 2, 2019

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Group revenue growth

Group growth perspectives		Assumptions

The last 2 years have been exceptional thanks to several major programs ramp ups and services growth (incl. civil aftermarket)

Safran: in a couple of years, from €16bn to €24bn / €25bn

LEAP-1A : agreement with Airbus to reflect market share in 2020/2021

LEAP-1B: 42 a/c per month today. Post return to service?

M88 : volatility in deliveries

Equipment: new outlook for widebodies

Bumpy organic growth for Aircraft Interiors (impact of 2017-2018non-offerability)

• Growth expected from a higher basis

• Safran - Goldman Sachs Conference - December 2, 2019

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Group adjusted operating margin growth targets

Group recurring operating margin targets

(CMD 2018)

16% - 18%

Group

>20%	>14%	<13%
	Equipment,
			Aircraft
Propulsion		Defense &
		Interiors
	Aerosystems

Continued cost reductions and productivity gains: Safran's DNA and a key priority for the management

Opportunities:

• Civil Aftermarket
• Services
• Euro / Dollar

Risks:

• 737MAX return to service
• Aircraft Interiors recovery pace

• Safran - Goldman Sachs Conference - December 2, 2019

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Cash flows from operations targets

	Group EBITDA (€M, illustrative)	FCF conversion above 50%
		trending above 60% in
	+~50%	NMA decision create
	outlook
		all businesses
3,746		Services

						payments)
						roadmap
0						Cash normalization should be progressive in
2018	2019e	2020e	2021e	2022e
						2020 and 2021
Note: at a hedged rate of 1.18 and at a spot rate of 1.25 over the period 2019-2022	Note: ESPH= Engine Service Per Hour

10 Safran - Goldman Sachs Conference - December 2, 2019

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Focus on FX

2019:

• Fully secured: 1,18
• Firm coverage raised to reflect growth in USD-related businesses
• No impact from the evolution of the €/$ spot rate

2020-2021-2022:

• Average annual exposure, now estimated at $11bn p.a., should remain stable in the coming years
• Target range secured: 1,16- 1,18 for 2020, 1.15-1.18 for 2021 and 2022
• Current spot rate: tailwind

2023:

• Initiated coverage at $2.2bn through knock-out options

€/$ spot level evolution might provide opportunities

11 Safran - Goldman Sachs Conference - December 2, 2019

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A balanced and disciplined capital allocation

Increase in self-funded R&D and investments to secure leadership and growth

Increase returns to shareholders:

• CMD 2018: ~75% of cumulated FCF distributed through buybacks and dividends (@40% payout assumption) over the period 2018-2022
• €2.3bn share buyback program now executed (20 millions of shares to be cancelled in 2018 and 2019)
• The Board of Directors will review the situation in order to ensure attractive equity return for shareholders through dividends or new share buyback program

12 Safran - Goldman Sachs Conference - December 2, 2019

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2020 trends

Revenue

EBIT

FCF

What is at stake in 2020?

• FY2019 as a very strong comparison basis
• LEAP 1-B production rate
• Growth in aftermarket
• Volume headwind for widebodies (787 production rate; 777X entry into service slippage; A380 deliveries cease)
• Lag effect of the non-offerability for Aircraft Interiors
• FX
• LEAP cost reduction. Fixed costs absorption depending on volumes
• Continuous improvements in Equipment, Defense & Aerosystems
• Aircraft interiors on going recovery
• FX
• Uncertain recovery of 2019 FCF headwind

13 Safran - Goldman Sachs Conference - December 2, 2019

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GREENING AVIATION

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Long term environment issues, major challenges…

Global aviation industry: only ~2% of global CO2 emissions (with aircraft manufacturing being negligible) but high expectations

CORSIA (2016): challenging targets for the industry:

• Between 2009 and 2020, improving fleet fuel efficiency by 1.5% annually;
  2 From 2021 to 2035, carbon-neutral growth;

• From 2050, target reduction in net aviation's emissions of 50% relative to 2005 levels

A range of measures to be considered across the industry (airframers, airlines, equipment suppliers, airports) with the support of public authorities

On the propulsion side: an extraordinary technological leap needs to be made in terms of energy efficiency

• Climate: a game changer in the industry
• Investing today in disruptive technologies to be leader in "low carbon" aviation: absolute priority for Safran

15 Safran - Goldman Sachs Conference - December 2, 2019

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… which are embedded in Safran R&T roadmap and strategy

Three components on the energy equation:

• Optimizing the propulsion fuel consumption
• Electrification and hybridization
• Sustainable fuels (from bio-fuels to synthetic fuels and hydrogen)

+€600M	75%
Of R&T in 2022, vs.	of R&T focused on
€317M in 2014	environmental efficiency

Specific solutions for each market segment:

• On the short run, improvements to existing energy systems and architecture (e.g., combustion efficiency, aerodynamics, weight saving, materials, etc.)
• On the medium term: technological breakthroughs (e.g. radically different aircraft and engine architecture such as Open Rotor, new energy sources etc.)
• Electric and hybrid propulsion: gains for short-haul and low capacity flights (i.e. regional, VTOL)

Two key assets:

• High-performancematerials: efficiency and lighter weight
• Agility: disruptive technologies will be achieved through cooperations with market players and new actors

3,000	1,200
R&T employees	PhD graduates in the
			Group

+1,050

Initial patent requests

filed WW in 2018

• No magic bullet
• Safran ready to explore all solutions

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APPENDICES

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Safran at a glance

An international Group of ~92,000, completely focused on Aerospace since Zodiac Aerospace acquisition in 2018

● 3rd WW Aerospace Group (excl. airframers) ● 2nd WW Aerospace Equipment supplier

3 activities:

● Aerospace Propulsion

● Aircraft Equipment, Defense & Aerosystems

● Aircraft Interiors

A very resilient business model, with Services generating ~46% of Revenue and different product lifetime

A clear ambition:

● Become the world's leading aircraft equipment supplier within the next 15 years

18 Safran - Goldman Sachs Conference - December 2, 2019

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Strategy wrap-up (1/2): Safran is well-positioned for success

WE HAVE THE KNOW-HOW

AND OPERATIONAL EXCELLENCE

WE HAVE

A BALANCED AND WINNING PORTFOLIO

WE HAVE TALENTED PEOPLE

WE HAVE A CLEAR ROADMAP

FOR THE NEXT 15 YEARS

• New ambitions ahead: leading the industry and preparing the next decades
  of the Aerospace and Defense industry

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Strategy wrap-up (2/2): a clear road map

• Complete the LEAP success story with best-in-class OE and aftermarket, in cooperation with our partner GE Aviation
• Successfully integrate Zodiac Aerospace and deliver planned synergies
• Invest in technologies to bolster our key-leading position as a full-fledged civil & military engine manufacturer and to become #1 WW Aerospace Equipment supplier in the next 15 years

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Key figures

inSafran's financial statements starting March 1,2018

ADJUSTED REVENUE (€M)	21,050	ADJUSTED RECURRING OPERATING	3,023
		17,414		15,953			INCOME (€M) 2,432	2,404
14,363	15,355	15,536	15,781				2,281		2,192
						2,089
							1,788

2013	2014	2015	2016	2017	2018	2013	2014	2015	2016	2017	2018
		Propulsion, Equipment, Defense and Security IAS 18	IFRS 15							IAS 18	IFRS 15
						Propulsion, Equipment, Defense and Security
		Propulsion, Equipment and Defense							Propulsion, Equipment and Defense
		Propulsion, Equipment, Defense and ten-month contribution of Aerosystems &				Propulsion, Equipment, Defense and ten-month contribution of Aerosystems &
		Aircraft Interiors								Aircraft Interiors

for the application of IFRS 15	Aircraft Interiors are fully consolidated
FY 2017 restated	Aerosystems and

DIVIDEND (€/share)

1.82

1.52 1.60

1.38

1.12 1.20

2013

2014

2015

2016

2017

2018

R&D + CAPEX (tangible + intangible) (€M)
		941	1,258 1,200
CAPEX	701			1,028	965	963
R&D 1,298	1,464	1,356 1,223	1,106	1,123	1,226
	2013	2014	2015	2016	2017	2018
Propulsion, Equipment, Defense and Security	IAS 18	IFRS 15

Propulsion, Equipment and Defense

Propulsion, Equipment, Defense and ten-month contribution of ex-Zodiac

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Last disclosure : 9m-19 and Q3-19 Revenue

Q3 revenue (€M)
	6,095
5,348	+14.0%
	+9.8%
	org
Q3 2018	Q3 2019
Q3 & 9m revenues

9m revenue (€M)
	18,197
14,854	+22.5%
	+12.6%
	org
9m 2018	9m 2019

• Reported revenues up including positive currency (EUR/USD average spot rate) impacts
• Organic growth supported by a strong momentum in all divisions

On track to meet 2019 revenue outlook

22 Safran - Goldman Sachs Conference - December 2, 2019

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