SAF.PA - Safran S.A.

Operator: Welcome to the Safran Half Year 2025 Results. At this time, I would like to turn the conference over to your host, Olivier Andries, Safran's CEO; and Pascal Bantegnie, Group CFO. Mr. Andries, please go ahead. Olivier Andries: Good morning, everyone, and thank you for joining us for Safran First Half 2025 Results Call. I will go through the presentation together with Pascal. First of all, we are pretty excited with the current trends in our markets. Those of you who attended the Paris Air Show were able to witness the renewed dynamism of our commercial and defense customers and their appetite for our new technologies. At the same time, NATO members have agreed on planned increase in defense spending, which will translate ultimately into new market opportunities for Safran. We are also pleased to report some improvements in the supply chain for the first time in a long time. We welcome the progress made on the transatlantic agreement to remove tariffs on aerospace products, which is a positive step for the industry. In parallel, we continue to implement targeted mitigation measures to manage any potential impact. Once again, Safran delivered a record performance this semester with double-digit growth across all key metrics. Note that we delivered a 17% operating margin, which exactly represents the midpoint of our 16% to 18% guidance provided back in December 2021. Civil aftermarket continues to perform very well across the board. In light of this momentum, we raised once again our full year guidance. Two additional information from July news flow. First, on July 21, we succeeded to close the acquisition of Collins actuation and flight control activities after a long journey. This is a key milestone in strengthening our flight control offering. The teams are now focused to deliver the expected cost synergies by 2028 and grow the commercial momentum. And at last, as you have seen this morning, we have announced the location of our fourth carbon brake factory. It will sustain the strong demand both in original equipment and MRO on this segment. Turning to Slide 4. Safran enjoyed a strong commercial momentum across its businesses. Ryanair ordered 30 LEAP-1B spare engines, to reinforce operational resilience and support its expanding 737 MAX fleet. This marks another step in CFM long-standing partnership with Ryanair. We unveiled THE Room FX with All Nippon Airways, a new business class seat for the 787-9. It combines privacy, comfort and sustainability, setting a new benchmark in premium cabin design. In line with our decarbonization road map to support aviation electrification and hybrid-electric propulsion, we set up a major partnership with Saft to develop a high voltage battery system for aviation, and we launched a technology program together with Daher, Collins and Ascendance to design a hybrid-electric propulsion architecture for light aircraft. On the defense side now, there is a clear commitment to increase investments with global military expenditure reaching levels not seen since the end of the cold war, particularly in Europe. As an example, members of the NATO Alliance have agreed committed on a significant defense budget increase. We are significantly raising our production capacity to meet the new demand and serve our backlog. The export momentum for the Rafale remains very strong. We signed a new contract for 26 Rafale for the India Navy. In the meantime, we decided to engage into the development of a more powerful evolution of our M88 engine powering the Rafale and design for the future F5 standard. This should help to grab new customers. We also build our strategy on external growth and key partnerships. We have announced several new partnerships at the Paris Air Show with key players, such as Bombardier from Canada, Diehl, Germany, Babcock in the U.K. Kongsberg in Norway, to name a few, this collaboration span air-to-ground munitions compact optronic systems for UAVs, multisensor artificial intelligence for persistent geospatial intelligence and Naval Strike Missile propulsion, for which we received an order of several hundreds of turbojet from Kongsberg in Norway. We expanded our partnership with Avio Aero and MTU to jointly develop Europe next-generation engine for military helicopters. Recent acquisitions include Orolia in positioning, navigation and timing. At the Paris Air Show, we have launched BlackNaute and Skylight, 2 cutting-edge systems delivering resilient PNT, resilient positioning, navigation and timing designed to operate in GPS- denied environment. Preligens, now Safran AI, our AI factory is expanding quickly. In the end, we aim to double our revenue base in defense and space activities by 2030. We have the right technologies. We have a clear road map to access new markets, we are building on partnership and external growth, and we are expanding our production capacities. Pascal, I'll leave you the floor to discuss H1 performance. Pascal Bantegnie: Thank you, Olivier. Good morning, everyone. As usual, I'll be commenting on the adjusted accounts, for which a bridge from the consolidated statement is presented on Page 7. The adjustments relate to FX or PPA. The EUR 4.8 billion change in mark-to-market of instruments hedging future cash flows has been adjusted in financial income in H1 2025. This is purely an accounting entry, no cash impact as our derivative instruments, hedging future USD cash inflows. On FX, Slide 8. In Q2, we have faced the fastest move in the euro-dollar since the '70s with more than 0.15 euro-dollar appreciation in a few weeks' time. Despite this, our team successfully managed to protect our hedging portfolio. As you all know, our strategy is notably based on options with knockout barriers. None of them have been triggered to date. As we speak, the dollar has returned to 1.14 a more comfortable level. I can confirm our target hedge rate of 1.12 for 2025 in the coming years. We strive to maintain an attractive hedge rate for as long as possible in a constantly evolving environment. Once we have a better view on the recently acquired business of Collins, we will factor in the hedging needs for USD and British pound. Turning to Slide 9. Revenue for the first half of 2025 reached EUR 14.8 billion, up 13% on an organic basis. The impacts of currency and scope are fully balanced out over the semester. Currency reflects a marginal appreciation of the euro versus the dollar and scope reflects the contribution of CRT, the engine repair business we acquired early 2025. Overall, Safran continues to deliver consistent, broad-based growth supported by favorable momentum in both services and OE across commercial aerospace and defense. The profits increased twice as fast as revenue at a rate of 27%. Recurring operating income reached EUR 2.5 billion. It is worth noting that the historically high margin level achieved in H1 at 17%, exactly at the midpoint of the range provided during the CMD '21. This is an improvement of over 7 points compared to 2021. I'll come back on the main drivers per division. Looking at the summary of the income statement beyond sales and EBIT, let me comment on other P&L items. One-off items amounted to a negative EUR 37 million, which includes an impairment charge on 1 program within Aircraft Interiors, restructuring costs, and I would say, the usual M&A expenses. Financial income is a positive EUR 32 million. The return on cash investment exceeded the cost of debt and translated into EUR 77 million in net financial interest. The apparent tax rate is 34%. This includes a onetime contribution of EUR 261 million, resulting from the 2025 finance bill in France. You must expect EUR 380 million to EUR 400 million impact on a full year basis, meaning an additional EUR 140 million in H2. Net income to the parent stands at EUR 1.6 billion, representing EUR 3.8 per share, up 11% from last year. Let's now take a closer look at our businesses, starting with propulsion. Revenue reached EUR 7.5 billion in H1, up 17% year-over- year. This performance was primarily driven by civil aftermarket with spare parts revenues up 21.6% in dollars, driven by strong demand for all engine families, CFM56, wide-body engines and LEAP. Services were up 21.1%, led by the ramp-up in LEAP RPFH contract revenue. On the OE side, LEAP deliveries were up 10% versus last year, after a drop of 13% in Q1, production accelerated sharply in the second quarter. Q2 was up 38% year-over-year and 29% sequentially. We also enjoy revenue growth in helicopter turbines, mostly in services and military engines with a favorable customer mix. Recurring operating income came at EUR 1.8 billion, representing a record 23.3% of sales, a margin improvement of 340 basis points. This is a lot to get excited with. This strong performance was driven by civil aftermarket both spares and services, the start of margin recognition of LEAP-1A RPFH contracts, including a onetime margin catch-up from previous years. And third, a significant number of LEAP spare engines in H1, and that ratio is due to decrease in H2. Moving on to Equipment & Defense on Slide 12. Revenue reached EUR 5.6 billion in H1, 8% organic growth. The growth rate of this division is lower than in propulsion due to its exposure to programs with a slower ramp-up at this time. The defense business growth was led by guidance systems, including Hammer and strong demand for resilient PNT solutions. We see more opportunities along the road. On the Aircraft Equipment side, aftermarket services increased across the board, especially in landing system, nacelles, avionics and electrical systems. OE volumes slightly grew notably on the A320neo and 787 landing gear year. Recurring operating income came in at EUR 703 million, up 7% with a margin of 12.5%, almost stable compared to 2024. This reflects a high comp base. Indeed, in H1 2024, we saw a onetime profit recognition when the Gulfstream 700 nacelle entered into service. On a full year basis, we still expect margin expansion by at least 50 basis points in that division. That says, the solid level of margin was supported by aftermarket growth, notably in landing gear, carbon brakes and aero safety system. Finally, turning on Slide 13, Aircraft Interiors. We are staying on track with our road map for continuous margin improvement year after year. We posted a profit of EUR 27 million in the first half, up EUR 17 million, lifting the margin by 100 basis points. While this remains modest, it reflects a solid level of services particularly in Cabin and continued progress in OE, notably business class seats, galleys and IFE. Revenue reached EUR 1.6 billion, organic growth of 15%. Both OE and services contributed to this performance. In Cabin, OE growth was notably supported by higher deliveries of 737MAX galleys, while services increased across the board. In Seats, OE volumes saw a strong increase with business class seat deliveries up 65% and aftermarket sales also contributing to growth. We did burn some cash in H1, also much less than a year ago, and we continue to strive to reach cash breakeven at some point. Turning to cash. Free cash flow generation reached a record level of EUR 1.8 billion, up 25% year-over-year. This strong performance was driven by a 25% increase in EBITDA, which reached EUR 3.2 billion. Change in working cap remained stable. The rise in inventories was partly offset by higher customer advance payments, notably on Rafale. We continue to invest to support growth and prepare for the future. CapEx totaled nearly EUR 800 million, with spending focused on expanding engine and MRO capacity as well as production capacity on landing gears, smart weapons, resilient PNT systems and low- carbon projects. This result reflects Safran's ongoing focus on operational excellence and cash discipline. Safran's net cash position remained almost unchanged with a balance of EUR 1.9 billion. The cash generation in the semester was used to pay the EUR 2.8 per share dividend and to finance the share buyback program. In the first 6 months, we bought back 2.9 million shares for cancellation purpose for a total of EUR 713 million. We also proceeded with the early redemption of the convertible bond, name is OCEANE 2028, resulting in a decrease of the net debt. We had a net cash out impact from acquisition of EUR 133 million related to the engine repair company called CRT. This net cash situation does not yet include the acquisition of Collins actuation business, for a total of $1.8 billion, which took place on July 21 with cash on hand. These are the proceeds from the electromechanical actuation business that we sold to Woodward. On the share buyback front, at the end of July, we have repurchased for cancellation purpose, 3.4 million shares for a total of EUR 850 million. These shares will be canceled at year-end together with a 0.2 million treasury shares that we reallocated for cancellation in April for a market value of EUR 50 million. Olivier, back to you. Olivier Andries: Thank you, Pascal. At last, on Slide 17. We have completed the acquisition of Collins assets. We've seen actuation and flight controls. This is a major milestone in our aircraft equipment strategy, focused on mission-critical equipment and functions. I spent some time last week with our new colleagues in the U.K., and I welcome these teams again from the U.K., Italy and France as well as from many other countries. They are enthusiastic to join Safran. This business will be integrated within Safran Electronics & Defense and be consolidated from August 1. Our full year guidance does not yet include their 5-month contribution, which we expect to range from EUR 600 million to EUR 700 million in revenues. This business fits very well with our Safran DNA, leading technology, mission-critical systems, recurring aftermarket revenue and drive profitable growth. We expect the business to grow at attractive growth rates and deliver low double- digit EBIT margin through a combination of volume growth and cost synergies. In light of the H1 performance and the continued business momentum in both civil, aerospace and defense, we are raising our 2025 outlook. Revenue should increase in the low teens, exceeding EUR 30 billion. Recurring operating income guidance is improved by EUR 200 million at midpoint to reflect better performance in civil aftermarket. Free cash flow guidance is improved by EUR 400 million at midpoint, which reflects the improved business perspective and include Indian Navy advance payment on the Rafale contract. The revenue growth outlook for our 2 key indicators has been raised. Spare parts and services revenues are expected to be up in the mid- to high teens. Our guidance excludes the contribution of Collins as previously said and any potential impact from tariffs. Thank you. We will now answer your questions. Operator: [Operator Instructions] First question today is from Olivier Brochet from Rothschild & Co Redburn. Olivier Brochet: Yes. I would have 2 questions for you, please. First of all, on aftermarket, civil aftermarket. Could you give us a bit of color on how things have moved in wide-bodies, narrow-bodies, content price, volume and a breakdown between services and spare in terms of overall contribution? And second, could you give us a bit of a sense of the catch-up in the margin in the LEAP CSAs? What sort of size are we talking about? Olivier Andries: Olivier, I will take the first one. On the CFM56 side, what we've seen is a slight growth in the number of shop visits. So we are in the range of mid, low- mid to -- low- to mid-single-digit growth in terms of number of shop visits. And we are benefiting also compared to H1 2024. We are benefiting from the catalog price increase that has been decided and put in place in August 2024. What has been the main driver for the growth of our revenues on CFM56 spare parts is the work scope. In fact, the work scope has increased compared to 2024. When we look at the high-thrust engine, this is where the growth has been, let's say, the most significant, so higher than -- even higher than on the CFM56. And here, this is really the impact of a higher number of shop visits compared to 2024. Pascal Bantegnie: Olivier, on your second question, we've discussed during the last Capital Market Day, our methodology to recognize profit on LEAP RPFH contracts. As you may remember, the trigger point was the introduction of the new HPT blade and the LEAP-1A. So if I was to size the catch-up effect, given the fact that we have not recognized any margins before 2025. I would say that about 60% of the LEAP RPFH profits were recognized in H1, and we expect another 40% in H2. So it was more H1 balance versus H2. But all in all, I would say, it's quite marginal. Don't expect a huge amount of profits. Operator: Next question is from Milene Kerner from Barclays. Milene Kerner: I also have 2, please. The first one, could you please clarify what retirement rate assumption you're using for your CFM fleet through 2030, how might the current low level of retirement influence those assumptions? And then my second question, at your Capital Market Day, you outlined a target of EUR 6 billion to EUR 6.5 billion in operating income by 2028. Following this morning guidance are great. Now you're going to see a compound annual growth rate of about 8%. Should we interpret this as a conservative outlook? Or are there any underlying factor that might explain the trajectory? Olivier Andries: Milene, I will take the first one and leave the second one to Pascal. The underlying assumptions on CFM, what we've seen the growth in traffic on the narrowbody side compared to 2024, which is about 5%, just slightly above 5% of available seat kilometers growth compared to 2024. The level of storage of CFM56 fleet has basically decreased a bit. So the -- we've reached something like slightly above 6% our fleet, which is stored, which is a lower level than even before COVID, 2019 where it was 7% to 8%. And the level of retirements has been very low, basically we were below 50 at the end of May of number of aircraft retired. So this is a very low level. This is even longer than pre-COVID again. So those are the underlying assumptions, which basically create a strong tailwind on the CFM56, flying hours, and therefore, shop visit, work scope and appetite for heavy work scope. Pascal Bantegnie: Milene, on your medium-term outlook question. We disclosed our 2028 ambition last December. It was based on our view our medium-term plan that was built mid of last year. Given the strong start of 2025 and the comments made by our partner a week ago or 2 weeks ago, and the aftermarket business on civil engines, we can only confirm that the spare part business is more promising than we had expected with slightly more activity by the end of the decade. Now our budget cycle calls for a review of our medium-term plan in the fall. So it is only then that we will be able to decide whether the 2028 guidance deserves to be revised or not. And as you know, there are also some uncertainty regarding tariff or reduced domestic demand across the U.S. So we'll take our view and then we'll come back to you in due time if we need to revise or not our long-term view. But for sure, the civil aftermarket activity is much stronger than we expected, and it should last longer than we had expected. Olivier Andries: Trend is very positive. Operator: Next question is from Chloe Lemarie from Jefferies. Chloe Lemarie: I have 2, if I may. The first one would be on the guidance for propulsion margin. I think Pascal at the full year, you mentioned 100 to 200 bps improvement. That was obviously much stronger in H1. So how should we think about the outlook for the year now? And the second one is still another dab at the 2028 outlook. I know it's a bit too early to give a proper updated view. But any reason why we should think that the growth that GE now sees on the CFM56 revenues by 2028. I think now they kind of see a 20-ish percent increase from 2024 to 2028 wouldn't apply to you in full? Or is it something that you view that you share with them? Pascal Bantegnie: Chloe, coming back to my comments on margin expansion in the 3 divisions. Let me start to confirm that in Aircraft Interiors, we expect at least 200 basis point margin improvement this year. In Defense, as I said earlier, at least 50 basis points. So, this is unchanged from what we said for this equipment and defense and aircraft interiors. Now on propulsion, I can confirm that we can raise our ambition and expect now margin to expand by 250 basis points this year instead of 100 to 200 basis points. On your second question on the 2028 outlook, we can clearly think that what GE said on the revenue compound growth for the years to come should apply in full to Safran on the Propulsion business. Now as you know, more globally, we have a different mix of businesses, with equipment and defense and our Aircraft Interiors activity. But in propulsion, despite that the comparison base could be slightly different from GE and Safran. But in the ballpark, I would say, the same should apply. Operator: Next question is from Benjamin Heelan of Bank of America. Benjamin Michael Heelan: I wanted to go a little bit more in detail on the propulsion margin and some of the comments you made to Olivier because I'm not sure I'm fully on top of it. So when you started recognizing profit on the LEAP-1A, was there an accelerated recognition this year? Or is this just because you've started recognizing profit on the LEAP-1A. And how do we think about that into '26, when you should start recognizing profit on the LEAP-1B. How can we think about that? Pascal Bantegnie: So we started to recognize LEAP-1A RPFH profits in H1 for the year 2025, but it also includes a onetime contribution for the margins that we should have recognized in the previous years, typically, 2023, 2024, 2022 and so on. So there was a slight onetime contribution from the non-recognized margin in the previous years. Once again, as I answered to Olivier, but maybe I was not clear enough. If we expect $100 this year, we did recognize $60 in H1, and we expect $40 in H2. So you see that the onetime contribution is not that important. Then in 2026, as GE confirmed, we plan to introduce a Maverick blade on the LEAP-1B at some point in time in H1 2026. This will be the trigger point to recognize margin on LEAP-1B RPFH contract, which will come on top of LEAP-1A, so you would expect higher profits in 2026. Benjamin Michael Heelan: Okay. And then if we think about the LEAP-1A recognition ex the catch up, are you able to give us some color as to what you've started recognizing that margin out? Is it roughly in line with the divisional margin in propulsion, is it a bit higher? Is it a bit lower? Is there any color there you can help us with? Pascal Bantegnie: No, I'm afraid we cannot disclose any details on that, Ben. Benjamin Michael Heelan: Okay. And then one for Olivier. Olivier, can you talk a little bit about the LEAP supply chain issue. Obviously, you've had the strike and resolved that now. Have you been able to catch up the flow of production in the facilities? How do you see that trending over the next couple of months and quarters into the end of the year? Olivier Andries: Ben. No, as we speak, we have not completely catch up the impact of the strike. We had a low Q1, mainly driven by, let's say, supply chain issues. And then we had the strike. So the plan is to recover by somewhere like end of October. By the end of Q3, we should mostly are recovered, not entirely recovered. The plan is to recover completely by the end of October in order not to, let's say, impact, let's say, the Airbus delivery plan. This is the goal. Our team and our partners team are fully engaged on that plan. And so we are going to continue to work very hard to recover backlog, this backlog. Yes. Operator: Next question is from Christophe Menard from Deutsche Bank. Christophe Menard: I had 2. One to bounce on the LEAP-1A RPFH catch-up. Should we expect a higher contribution when it comes to the 1B RPFH catch-up? Or is it similar in terms of margin? Or will you also apply a 60-40 type of split? Second question is, you mentioned the new engine for the Rafale. I was wondering the financing of this, is it something you will be paying out of your own funds? Or will there be some funding coming from the government for that? Pascal Bantegnie: Christophe, to be honest, I don't know yet what will be the catch-up on the LEAP-1B because the LEAP-1B RPFH contracts may have different margin profile compared to LEAP-1A. So I've not yet looked at the unrecognized margin that we have had in the past years. So I don't have the answer to your question, but there will be a slight catch-up impact, the onetime contribution as soon as we start recognizing the LEAP-1B profit next year, yes. Olivier Andries: And Christophe on your second question, this, let's say, increased thrust engine development for the Rafale F5 standard, as it is part of the F5 standard, we are engaged in the discussion with the French MOD for the funding of it, indeed. Operator: Next question is from Robert Stallard, Vertical Research. Robert Alan Stallard: Just wanted to follow up on Ben's question. You clearly had a lot of pressure from Airbus to ramp up those LEAP engine deliveries in the second half. I was wondering if you could comment on your confidence in hitting that Airbus delivery target? And then secondly, on defense, you commented you expect the revenues to double by 2030. Do you see it as a straight line to get into that number? Or is it more back-end loaded? Olivier Andries: Robert, well, yes, as I mentioned in my response to Ben, the goal is to recover our net backlog on the LEAP deliveries to Airbus by the end of October. So we have a plan for that. So it's all now a matter of execution. This is a challenging but achievable plan. And once again, the team is fully, fully engaged. We'll take in due time the right decision also with respect to allocation of spares versus installed engines to Airbus in due time. On your second question, when I mentioned that we expect to double our revenues on defense more precisely, it's on our defense electronics business. On the engine side, on the propulsion side, basically, the growth is driven by the, let's say, very successful export dynamic of the Rafale. We have also a strong dynamic on military helicopter engines as well. But when I mentioned that we expect to double our revenues in defense, I was basically talking about our defense electronics. Yes, we are really confident on that. By the way, we have decided to double the capacity of our navigation system production in [indiscernible]. We have basically decided to multiply by 3 and probably even more our production capacity for missile engines. So the dynamic is very strong in Europe. And it's not backloaded. The growth is -- we are talking about like a 20% growth sort of compounded annual growth. So the dynamic is very strong. Our navigation system, what we call hammer. Hammer is our air-to- ground strike missile, in fact, and on optronics as well. Operator: The next question is from Ken Herbert at RBC CM. Kenneth George Herbert: Two questions, if I could. The first is on the full year guidance for Civil Services versus aftermarket, the guidance implies a bit of a step down in growth in the second half versus the 21% to 22% we saw in the first half to get to the mid- to high teens. Anything in particular you'd call out there that in terms of the decel in the rate of growth or just general conservatism? And then second, for the increase in the full year free cash flow guide, can you just comment how much of that is timing of M88 engine payments relative to strength across the business and specifically in the aftermarket? Pascal Bantegnie: Good morning, Ken. First, on the full year outlook for spares and services. So we are raising our guidance to -- from mid-teens to mid to high teens. True in H2, we should see the growth rate lower than what we had in H1. But if I look in value in dollar terms, we should have higher revenues in spare parts and services in H2 when I compare to H1. So it's purely as a comp base. And as you know now, we escalate prices for the catalog and spare parts on the 1st of August, meaning that the seasonality has changed compared to the previous years. Now Q1, Q2, Q3, we see sequential growth for each and every quarter, and usually, there is a bit of a step-down in Q4. On your second question on the free cash flow guide, it's coming from strength of the business purely. So there is no onetime effect. It's purely aftermarket and the inclusion of the advance payment on the Rafale, which was not in our budget. And by the way, when we look to our 2028 free cash flow guide, I was very explicit at the last Capital Market Day that we had not included any advance payments on the new Rafale contracts. So Indian Navy is a new contract. So we will receive advance payments not only in '25, but for the years to come as well. Olivier Andries: Ken, on top of Pascal's comment. And I'd like to add that basically on the military propulsion, on the military propulsion, which encompasses both military combat aircraft engines. And also helicopter engines, basically, we are more back-loaded, meaning that H2 is going to be stronger than H1. So this is also another ingredient that makes us very confident that the H2 performance in propulsion will be similar than H1. Pascal Bantegnie: We'll take another a couple of questions. Operator: Next question is from Herve Drouet from CIC Market Solutions. Herve Drouet: Two questions as well on my side. The first one is, could you -- is it possible to be a bit more specific on the one-off you have booked for LEAP-1A, profit booked 60% booked in H1 kind of order of magnitude will be useful. And the second question is the allocation of spare engines versus new engine. I understand, I mean there has been a recent spare engines been delivered to airlines. I was wondering how are you allocating spare engines versus OEM? Is there any rule of thumb you can give us in the way you allocate those engines? Pascal Bantegnie: Herve, I guess you should not overstate the contribution we benefited from this onetime contribution. Frankly, it's quite marginal. And as I responded to Chloe, with a 250 basis point improvement in margin for the Propulsion segment, you'll see that the performance we will achieve in H2 should be quite similar to what we had in H1, meaning that this onetime contribution in H1 didn't play a lot of -- did not have such a strong impact. So I will not quote more than I did on that, but don't overstate this onetime contribution. Olivier Andries: And Herve on the allocation of spares versus installed, our guidance really is and our direction is really to make sure that our airline customers keep flying. This has always been the brand of CFM. So we keep you flying. And so it's really making sure that we avoid aircraft on the ground. This is what is driving us, mainly, and this is what the airlines are asking us to ensure because it is very frustrating for an airline to have an asset and not being able to fly it and use it because of an engine issue. So it's all about avoiding aircraft on ground, making sure we keep airlines flying. So it's a weekly -- it's a week per week decision with respect to allocation. Pascal Bantegnie: We'll take last question, if any. Operator: Last question is from David Perry, JPMorgan. David Howard Perry: Just a factual question really. It's nice to see the very bullish comments on defense. Can you just tell me what are the actual sales in Equipment and Defense in defense? And what percent of helicopters is defense, please? Olivier Andries: On the defense contribution to the electronics, the defense electronics contribution into our defense and equipment branch is today, turning to Pascal above 1.5. It's over 1.5 today, above EUR 1.5 billion today. And so we expect that to double by 2030. We have a space contribution, space, equipment contribution, which is close to EUR 0.5 billion as well. So EUR 1.5 billion defense, space, close to EUR 0.5 billion. So this is expected to double. On the helicopter side, it's roughly 50-50 between commercial and military. It's roughly 50-50. David Howard Perry: Okay. I just -- the reason I ask, I'm just -- I think you said defense is about 18% of the group. And I just can't quite get there. I can follow up with our Armelle offline, but obviously, you got military aircraft, the numbers in defense electronics are about what I thought. I just wondered if helicopters was higher. I think it would just be -- you're talking about defense a lot and it's an exciting part of the story. It would just be nice to have some audit trail of the numbers would just be a request, if I may. But it's helpful. Your answer is helpful. Pascal Bantegnie: David, yes, we always say that defense represents more or less 20% of total group sales. And I will split that into 2 parts, 10% is what I would call military propulsion is there for the Rafale, the A400M military helicopters and another 10% in defense electronics and space that Olivier was discussing. This is a broad split of what we call the broad defense sales within the group. Olivier Andries: Sorry, on top of that, some of our equipment business is also directed towards military, such as landing gear for Rafale, landing gear for Eurofighter, landing gear for F-18, wiring for F-16, Aerosystems such as evacuation slide pilot equipment, our Aerosystems are also directed towards military. So the 20% that Pascal has mentioned is taking into account all that. Pascal Bantegnie: Thank you. Have a good day. Operator: Thank you. And this concludes today's conference call. Thank you for participating. You may now disconnect.

Olivier Andriès: Good morning, everyone, and thank you for joining us to our full year 2024 earnings call. I'm here with Pascal. Starting with our key highlights. 2024 has been a landmark year for Safran with revenues, profits and cash flows reaching record levels. These achievements were underpinned by strong aftermarket activity across the board, which notably civil aftermarket activity growing by 25% in dollar terms. Supported, among other things, by the more than 10,000 aircraft in service, powered by a second-generation CFM56. Our focus on operational excellence continues to deliver results. We improved our operating margin by 150 basis points year-over-year, and we are pleased to see Safran Seats reaching operating breakeven, marking another milestone in our turnaround efforts for Aircraft Interiors. In terms of OE deliveries, LEAP volumes were down 10%, reflecting supply chain constraints. Equipment & Defense and Aircraft Interiors businesses saw an increase in OE volumes benefiting from strong customer demand. On mergers and acquisition, we have just completed the acquisition of CRT, a U.S. MRO leader. At the end of December, we have divested our 50% share of Roxel to MBDA and signed an agreement with Woodward for the sale of our U.S. Electromechanical Actuation Activities. The closing of Woodward deal is subject to the concomitant completion of Collins actuation and flight control activities acquisition expected at the end of H1 2025. Looking ahead to 2025, we are confident to deliver another year of substantial revenue and profit growth. Turning to Slide 4. Let me give you an overview of Safran's remarkable financial performance in 2024. Revenue grew by 18% at EUR 27.3 billion. Each of our divisions contributed to this strong growth, reflecting robust demand and our ability to execute in a volatile environment. Recurring operating profit is up 30% at EUR 4.1 billion. Recurring operating margin expanded by 150 basis points, reaching 15.1%, reflecting strong business activity and illustrating our focus on operational excellence. Free cash flow was EUR 3.2 billion, which is a standout performance considering pressure on working capital. Based on this good set of results, and as per our dividend practice to distribute 40% of our net results, we are proposing a EUR 2.90 dividend per share for 2024 up 32% compared to last year, returning EUR 1.2 billion to our shareholders and reflecting our confidence in the future. Turning to Slide 5. Commercial momentum has continued in the recent weeks across Safran key businesses. In December, CFM achieved a significant milestone for the LEAP-1A engine with FAA and EASA certification of the new high-pressure turbine durability kit. These enhancements extends time on wing and durability, particularly in challenging hot and dusty environments. This is the trigger to start recognizing profit on LEAP-1A RPFH contract. We celebrated the first commercial flight of the LEAP-1A powered Airbus A321 extra long range with Iberia, marking a milestone in long-range single-aisle aviation. We are very proud of the full-fledged certification by EASA for our ENGINeUS 100 a world premier for a noteworthy electric motor to power an aircraft. This is paving the way for extended application of electrical machines in general aviation and VTOL for mission-critical functions with the highest standards of flight safety rules. Moving to our expanding defense business. In the U.S. We have launched Safran Defense & Space Inc. to expand our footprint for instance, in Bedford for electrooptics in Denver for small satellite propulsion and in Rochester for the positioning, navigation and timing systems. We secured new contracts with the Bundeswehr in Germany, to supply advanced infrared binoculars and with the Egyptian Navy to provide optronics and navigation systems. Each of these achievements demonstrate Safran's ability to drive innovation, support our customers and deliver value in an increasingly competitive global market. Now on Slide 6, sustainability. An update on our climate strategy road map achievements. In 2024, we devoted nearly EUR 700 million in self-funded research and technology, of which 88% was dedicated to environmental efficiency. In addition to the engineering certification, we have made several other key progress in our technological road map, reinforcing our leadership in sustainable aviation. We conducted ground test of the first liquid hydrogen-fueled turbine engine for light aviation with our partner, Turbotech and Air Liquide. We completed the EcoPulse flight test campaign with Daher and Airbus, demonstrating the potential of distributed hybrid-electric propulsion. We inaugurated BeCOVER in Belgium, which is a unique compressor test center designed to validate the next-gen aircraft engine innovations. We remain fully committed to reducing our carbon footprint and driving sustainable transformation across our operations. Our EcoVadis rating increased to 65 out of 100, reflecting ongoing improvement in ESG performance. We are on track to meet our 2025 and 2030 Scope 1 and 2 CO2 reduction targets aligned with the Paris agreement. We hosted our third supplier day, engaging our top 400 suppliers in our sustainability journey. To further drive our sustainability agenda, we continue to integrate sustainability into our governance and operations. I will now hand over to Pascal for more details on our 2024 results. Pascal Bantegnie: Thank you, Olivier. Good morning, everyone. I'll be commenting on the adjusted accounts for which a bridge from the consolidated statement is presented on Page 8. As usual, the adjustments relate to FX or PPA. The EUR 4.7 billion change in mark-to-market of instruments, hedging future cash flows has been recorded in financial income in 2024. This is purely an accounting entry with no cash impact. FX trends are illustrated on Slide 9. We continue to actively manage our currency exposure and secure favorable rates in a strong USD environment. In 2024, the euro-USD rate fluctuated around 1.08 all year with a drop at 1.04 at year-end, which explains the mark-to-market from the previous statement. We achieved a hedge rate of 1.12 an improvement of 0.01 compared to 2023. For '25 and the following years, our hedge rate is set at 1.12, same as in 2024. By convention, the annual estimated net exposure is capped at $14 billion, and this should not be interpreted as a medium-term business forecast. Our hedge book stands at $44.7 billion, ensuring long-term visibility and predictability for operations. On the income statement, one-off items amounted to EUR 6 million, including capital gain from the Roxel divestment of EUR 83 million. In financial income, the return on cash investments exceeded the cost of debt and generated EUR 157 million in net financial interest. Additionally, FX revaluation of some positions on the balance sheet had a negative impact of EUR 106 million. The apparent tax rate is 23.8%. Since the French draft finance bill was not adopted by year-end 2024. There was no corporate surtax applicable that year. According to the latest news in France, 2025 should be the one and only year when the surtax applies. Net income attributable to the parent stands at EUR 3.1 billion, representing EUR 7.37 per share, up 52% from last year. On Slide 11, as Olivier said, 2024 revenue reached EUR 27.3 billion, up 17.8%. It's a 17.1% organic growth with very consistent growth rates each quarter of the year. Original equipment sales were up 17.2%, driven by volume, customer mix and price. Service revenues were up 17%, benefiting from strong demand from airlines for MRO and spare parts. Then we had a slight impact from the scope, a modest impact of 0.6%, reflecting the M&A activity in terms of divestments and acquisitions of different businesses. Recurring operating income was EUR 4.119 billion, up by nearly EUR 1 billion from -- in 1 year. It is up 27% organically, reflecting robust execution across our businesses. Margins expanded by 150 basis points to 15.1% of sales, demonstrating the margin acceleration that we discussed during the Capital Markets Day back in December '21. Key drivers of this performance include price and volume effects in OE and MRO positive mix for our civil engines and operational excellence with sustained cost discipline and efficiency gains offsetting inflationary pressures. While R&D investments increased by EUR 160 million, the EBIT impact remained stable as a percentage of sales. It was 4.1% in 2024, which compares to 4.3% of sales in '23. Let's now take a closer look at our businesses, starting with propulsion. Revenue at EUR 13.7 billion, up 15%. OE revenue grew by 13.5% with 1,407 LEAP engine deliveries down 10%, impacted by supply chain constraints. The lower volume was more than made up for by a better customer mix and pricing. Helicopter turbine engine deliveries increased by 94 units, totaling 682 deliveries. M88 fighter engine deliveries remained stable with 40 units comparing to 42 in 2023, I would say, as expected, and it did benefit from the favorable customer mix. Propulsion services revenue was up 16% driven by a 24.9% growth in civil aftermarket in dollars, in line with our guidance. Our new spare parts indicator is up 17% in dollars, thanks to more share visits and higher prices for both CFM56 and high-thrust engines. Our new services indicator is up 38% in dollars, led by LEAP RPFH contract as you know, with no margin recognition in 2024 and high-thrust engines. Helicopter turbines and military engines also helped boost the growth of propulsion services. Recurring operating income was EUR 2.8 billion, up 18%, margin reached 20.6%, up 0.5 point compared to 2023, supported by the good dynamic in aftermarket for CFM56 and favorable customer mix and pricing. Equipment and Defense sales reached EUR 10.2 billion, up 17.7%, original equipment revenue was up 18.3%, driven by higher volumes of net sales on the A320neos and the GE Gulfstream 700, more electrical systems for the 787 and the A320neo as well as increased defense sales on guidance systems, optronics and land systems. Service revenue was up 16.8% with a strong recovery across the board. Recurring operating income reached EUR 1.3 billion up 31%, with an operating margin at 12.2%, up 100 basis points compared to 2023, which was our commitment. This was expected, thanks to the OE ramp up, strong services, better pricing and a relentless focus on operational excellence, which helped us offset the impact of inflation. Finally, on Aircraft Interiors, we can share some great news. That division is now back to the black. Sales were EUR 3 billion, up 25.2%, showing very strong growth but this is still 5% below the record levels of 2019. OE was up 24.5% with strong growth in Cabin activities like Custom Cabin, A350 Lavatories, A320 Galleys. In the Seats business, we delivered nearly 2,500 business classes to major airlines worldwide making significant progress in our industrial and engineering processes. Services were up 23.6%, benefiting from strong growth in both seats and cabin mainly in spare parts. So we've made progress in turning around aircraft interiors. After breaking even in full year 2023 for cabin, cabin and IFE are now positively contributing to recurring operating income. And seats has reached operating breakeven for full year 2024. In the second half of the year, Aircraft Interiors was even at breakeven in terms of free cash flow generation. As a result, the division posted a positive recurring operating income of EUR 27 million. On Slide 16, Free cash flow exceeded our expectations at EUR 3.2 billion. This is an increase of nearly EUR 250 million compared to EUR 23 million, demonstrating the efficiency of our cash management. This performance comes from a 31% increase in EBITDA and stable working capital needs, thanks to higher customer advance payments and deferred income, which offset the rise in inventory in euro terms. We also continue to invest in new production capabilities, especially in engine MRO as well as in low-carbon projects. Safran was net cash positive at the end of 2024 with a positive balance of EUR 1.7 billion, which represents minus 0.3x EBITDA. Besides the free cash flow, we paid a dividend of EUR 2.2 per share and repurchased shares for EUR 1.3 billion. We also proceeded with the early redemption of the OCEANE 2027 convertible bond using shares purchase in 2022 and 2023. And we had a net cash out impact from our M&A activities of nearly EUR 300 million. So we remain fully deleveraged and we enjoy a strong balance sheet. Switching to shareholder returns on Slide 18. For the fiscal year 2024, Safran will propose a dividend of EUR 2.9 per share, up 32%, representing a 40% payout ratio on the adjusted net income. On share repurchase programs, in 2024, we repurchased 6.5 million shares for a total of EUR 1.3 billion, including the EUR 750 million in share buybacks, resulting in the cancellation of 3.6 million shares, which had an accretive impact of 0.86% on the equity ownership. We also completed the hedging of the potential dilution of the 2028 OCEANE convertible bond. And early this year in 2025, we started the execution of our 5 billion program for share cancellation with the first tranche of EUR 350 million. All shares purchased under this program in 2025 will be conserved by December 31. Olivier, back to you. Olivier Andriès: Thank you, Pascal. At our last Capital Market Day in December, we provided a preliminary outlook for 2025. Based on 2024 results and market trends, we are now raising the 2025 outlook. We expect underlying market trends to remain strong with a further increase in OE volume deliveries and robust demand for spare parts. We now expect high single-digit plus growth in spares up from previous expectation of mid- to high single digit for 2025. Therefore, Safran expects to achieve for full year 2025, excluding Collins and any potential impact of new tariff implementation. Revenue up around 10% and recurring operating income between EUR 4.8 billion and EUR 4.9 billion; free cash flow between EUR 3 billion and EUR 3.2 billion. Our free cash flow guidance includes an estimated impact of the future French corporate surtax of EUR 380 million to EUR 400 million. Without this surtax, our cash conversion rate is above 70%. In closing, I would like to focus on our few key priorities. We remain totally focused to meet customer demand by managing the ramp-up in OE deliveries despite supply chain constraints. And here, LEAP is our top priority with the introduction of the new HPT blade on the LEAP-1A. We will continue to keep our customers' flying providing MRO and spare parts and ensure a smooth CFM56 to LEAP aftermarket transition. We expect to close the Collins' actuation and flight control activity acquisition by midyear 2025. We will continue our clear and ambitious research and technology road map to tackle the greatest challenge of our industry, decarbonization. And last but not least, we are focused on our growth trajectory, increasing operating profit, expanding margin and cash. Thank you for your attention. We are now ready to answer any questions you may have. Operator: [Operator Instructions] First question is from the line of Benjamin Heelan from Bank of America. Benjamin Heelan: I hope you are both well. First question I had was on the spares guidance. Now high single digit plus. I think that implies that you can actually go into the double-digits. So is that fair? And again, can you give us a bit more color as to what's changed versus the mid-single-digit low end a few months ago? Olivier Andriès: Ben, Olivier speaking. Yes, we have a slightly revised up our guidance relating to spare parts. It's basically, rising up a bit the volume of shop visit and engine inductions basically. We've not changed our assumption relating to work scope and pricing. Benjamin Heelan: Fine. Okay. That's clear. And then second question is around the long-term free cash flow guide that you gave at the CMD obviously, already raised cash for 2025 and you did better than you were guiding for in 2024. So when I do the math from here, I actually think it's very, very difficult for you to do the [ EUR 15 billion ] at the low end. And actually, it's going to be quite hard for you to beat -- sorry, to do worse than the [ EUR 17 billion ] that you've guided for at the upper end? Because if we look at the 2025 cash guide that you've given and you strip out the French tax you're doing kind of 3.4 to 3.6 on an underlying basis anyway, which I assume will grow from here in 2026, 2027 and 2028. So can you just give us a little bit of color around that? And what are the other dynamics that we need to be thinking about in cash flow? Because it just seems at this point, to be very, very conservative. Pascal Bantegnie: Ben, Pascal speaking. We were very pleased with the free cash flow generation in 2024, which came beyond our own expectation. We were guiding for EUR 3 billion. And we ended up with, let's say, EUR 200 million more than expected. It's coming from working cap, meaning the assumption we had for inventories or customer payments. We did revise upwards our 2025 guidance by, let's say, on average, EUR 200 million. Again, based on the first better profit expected in 2025, which translates into cash and also some changes we made in our outlook for working cap. So going forward, we provided at the Capital Market Day guidance for cumulative cash of [ EUR 15 billion to EUR 17 billion. ] We fully understood that this was seen as very conservative by the market. So we are pleased to do better in the first 2 years of that period of time. A bit early to say if we will beat and if we do, by how much at the end of the day. So let's go step by step year after year, and we'll see at some point in time if we can raise that on that. But clearly, it's too early. There are a lot of moving parts in terms of the reason at which we will deliver LEAP engines and then the advanced payments we do receive from customers. What about the Rafale export contracts we could win in the meantime. How we will manage inventory at the time where supply chain constraints are still persisting. So a lot of moving start points, sorry. So a bit early to be more precise on the cumulative cash over the period. But it is a good start, if not an excellent start, I agree. Benjamin Heelan: Cool. All right. Final very quick one for me. Your comments on proportion on OE positive mix and price. Can you talk about that pricing dynamic a little bit? Is that something we're going to see again in 2025? And can you just remind us where we are on the breakeven point for the LEAP? Pascal Bantegnie: Yes. On the OE side, what we wanted to point out is that we've delivered much less LEAP installed engine and a slightly higher spare engine. So the ratio was clearly helping in terms of results in terms of EBIT. In terms of pricing for OE engines, we see a slight improvement over time, but nothing material with respect to the EBIT performance. Olivier Andriès: The engine that we are going to deliver in 2025 basically are based on, let's say, commercial contract that we have signed years ago. So I mean, it's progressing year after year for sure. A key element is also the spare engine ratio, which basically I can confirm is on the low teens. Operator: We'll now take the next question, this is from Robert Stallard from Vertical Research. Robert Stallard: A couple of questions from me. First of all, on the new LEAP-1A HPT Blade. I was wondering if you could comment on how the performance has been so far? And then when do you expect the LEAP-1B blade to be certified? And then secondly, I was wondering if you could comment on your expectations for high-thrust engine OE and aftermarket revenue growth in 2025? Olivier Andriès: Robert. It's too early to give an answer on the LEAP-1A new blade durability. I mean we are just starting to induct those new blades during the shop visit and also in the new OE engine deliveries. So it's too early to say what's going to be the impact, we are very confident because we made all the [ ground ] test. And so we are very confident that the time on wing will double. So that's for sure. On the LEAP-1B, we expect the certification, the new blade to occur within the year, within 2025 for the LEAP-1B new blades. On high-thrust engine, yes, the dynamic is strong on that one. And that also helps to raise a bit. That has helped us to raise a bit of guidance on the spare parts in this index for 2025. Very strong dynamic on high-thrust. Operator: This is from Ross Law from Morgan Stanley. Ross Law: So just going back to the topic of the mix between OE and spare engines and propulsion. You mentioned low teens. Can you just run through what that was in Q4 '24? And then also how you see this trending quarter-by-quarter through 2025? Olivier Andriès: No, Ross, we don't give this level of detail. So sorry for that. Ross Law: The low teens is the current level? Olivier Andriès: Low teens is the current yearly level. Now you are well aware that we do every week an allocation of new engine deliveries between installed engine delivered to the airframers and spare engines delivered to the airlines. So it can vary from one quarter to a quarter, of course. So the key point, the meaningful one is the yearly result. And I can confirm it's low teens. Pascal Bantegnie: The color we can provide is on 2025. So we expect LEAP deliveries total to be up 15% to 20%. And the ratio between spares and installed engines will slightly decrease, but in number of engines in volumes, it should be more or less flattish from 1 year to the other. Operator: We'll now take the next question. This is from Ken Herbert from RBC Capital Markets. Kenneth Herbert: Yes, Olivier and Pascal. I wanted to see if you can comment on lingering pressure within the supply chain as it relates to either LEAP or CFM56 spare parts. Are you seeing things progress as expected and improve as hoped? Or are there still some pockets of softness or concern? And then specifically, can you provide any more detail on the cadence of LEAP deliveries, we should expect this year across the calendar quarters to get to the up 15% to 20%. Olivier Andriès: Ken, as you know, the supply chain issues are persisting, but improving progressively. So we will progressively see, let's say, an easing in supply chain constraints all across the board. The number of critical, let's say, suppliers and critical sites are basically decreasing month after month. We still have across the board some, let's say, pain points globally. But I can say that the situation is indeed progressively improving. But still there, I mean, the demand is still stronger than what the supply chain can deliver. And this will still be the case globally in 2025. Now as we said on the LEAP deliveries, we are confident we will be able to deliver 15% to 20% more LEAP in 2025 compared to 2024, which has been the year of transition, especially on the, let's say, new HPT blade. Pascal Bantegnie: But we won't provide the quarterly guidance for the LEAP ramp-up. Operator: We'll now take the next question. This is from Ian Douglas-Pennant from UBS. Ian Douglas-Pennant: Douglas-Pennant at UBS. On spare parts, sales growth extremely strong in Q4 and services slower than your guidance would suggest? And then you've alluded to a higher proportion of LEAP engines sold as spares as well. I'm surprised then that your -- if I'm not being too greedy, then that your profitability is not even higher in Q4. Is there some offset to profitability that we should think about there because with LEAP sales and spare parts growing, we should expect larger? And then my second question, please, on tariffs. If you have any general comments on how you might manage your exposure there or how you might size any particular exposure, that would be very helpful. Pascal Bantegnie: Ian, on your first question on this side of the table, we were very pleased with the performance in EBIT for Q4 and for the full year. So I don't have in mind any negative events that occurred later in the year. Olivier Andriès: On tariff, as you know, we -- I mean, we have a strong footprint in North America, especially in the U.S. in Canada and in Mexico. And yes, indeed, we deliver equipment and parts to our U.S. customers from Mexico and Canada. So it's too early to give a precise answer to your question. We are monitoring very closely what's happening here. We are looking at that. But as long as we don't have the scope of the potential tariffs and the details, we are not going to be in a position to provide a precise answer. But we are monitoring the situation carefully. Operator: We'll take our next question. Next question is from the line of George Zhao from Bernstein. George Zhao: First question on CFM 56 shop visits. So in 2023, it was over 2,000, by '25, your targeting 2300. So if we straight line that, it would be high single-digit growth in '24, '25, I guess, what was the growth in '24? And given your earlier answer that the change in the guide is all on volume, would it be fair to say that for '25, you're now expecting about mid-single-digit volume growth? And then second question, as to Ian's question on profitability. I mean profit -- I mean, sorry, propulsion margin, it was down year-over-year in H2. We know H2, '23 was strong, but we had fewer OE, fewer LEAP deliveries, pricing benefit on OE, strong growth in spares. I mean, all of those would have seen the ingredients for margins to improve. So why did it decline year-over-year? Olivier Andriès: George I will answer on the first one, the shop visits. So in 2024, when we look at shop visit volume, it has grown mid-single digits in 2024 versus 2023. Looking ahead, we see again a mid-single-digit growth for shop visits. And this is why we have risen a bit our spare parts forecast for 2025. So mid-single-digit growth again in 2025. Pascal Bantegnie: On your second question, George, I will highlight that the line called holding and eliminations came lower than you all expecting. I just would like to recall what is accounted into that category. It is, first, the cost of the holding, okay? And then the second is cost for services that we provide to all the companies within Safran. Typically, the M&A team is centrally and then recharge to the different companies of Safran. The fiscal team is central, so on and so on. In 2023, we had quite a high negative number in this category due to the fact that we have set up an employee shareholder plan that all the cost was accounted for into the holding and elimination. And in 2024, in the second half, we did recharge to all Safran companies their own respective costs. So this is why holding and eliminations is coming lower than in 2023 at, I guess, a negative EUR 30 million or so million. And when you look at the profitability branch by branch in H2, there is this kind of negative weighting on the margins. So that explains the propulsion margin you see in H2. Olivier Andriès: So this is why you need to take into account this correction when you compare H1 and H2. Pascal Bantegnie: And I would say the run rate in the holding and elimination going forward should be more in the EUR 30 million to, let's say, EUR 50 million negative going forward. George Zhao: And then, just to confirm, maybe when you say mid-single-digit volume growth in '24 and '25 starting from the base of above 2023, does that still mean you do around 2,300? Olivier Andriès: Around, yes. Operator: We'll now take our next question. This is from Chloe Lemarie from Jefferies. Chloe Lemarie: I have 2 questions, if I may. The first one is actually on the de-correlation, if I may call it like this, between your civil aftermarket growth in Q3 and Q4 and GE's performance in commercial services. So maybe if you could explain what are the end market exposure that drive that difference? And also on the CFM56 internal shop visit, if you could explain how these are allocated or competed for between yourself and GE, that would be great. And the second one is a technical one. On the French surtax treatments on 2025 EPS, how should we think about this in relation to the payout, please? Olivier Andriès: On civil aftermarket, just as a reminder, our indicator on spare parts takes into account mostly CFM56 for sure, LEAP is going to start. And high-thrust engine as per our share of this program, which is, as you know, on the GE90, it's 25%. So -- and just as a reminder, when our partner is basically communicating on their spare parts, it's all across the board combining, let's say, narrow-body engines and wide-body engines. So that can explain. Pascal Bantegnie: What we could say as well is typically the LEAP shop visit today for third parties not inside the RPFH contract, most of the work, which is done relates to the HPT blades, meaning that GE is providing those parts to the MRO shops. So it's revenue for GE, not revenue for Safran. We do not yet recognize a lot of revenues on LEAP third-party MROs. Olivier Andriès: On top of that, we don't have the same accounting rules. So this has to be taken into account as well. And specifically on the CFM56, we don't have the same exposure to the services. Our partner basically has much more MRO activities themselves. I mean internal shop visit that we do have. So that can explain the differences. Chloe Lemarie: Just if I can follow up on -- just on the internal shop visit because obviously, they indicated theirs were down in Q3 and in Q4. So yours were up, right in Q3 and Q4? Pascal Bantegnie: You mean sequentially? Chloe Lemarie: Year-on-year. Pascal Bantegnie: Year-on-year, I would guess so. Are you talking internal shop visit -- our internal shop visit? Chloe Lemarie: Yes, your internal CFM56. Olivier Andriès: We don't disclose that on the CFM56. Now what I can say year-over-year on the LEAP, globally, when we look at the shop visit on LEAP, which are you know that LEAP, we are only mainly talking with services today. On LEAP, our internal shop visits have increased by around 30% year-over-year between 2024 and 2023. And sorry -- and it's going to grow 30% between -- sorry, it's going to grow 30% between 2025 and 2024. Am I clear? Chloe Lemarie: Yes. Yes. Olivier Andriès: So a 30% growth on LEAP internal shop visit or LEAP shop visit globally, so on LEAP shop visit of 30% between 2025 and 2024. And I can also give another element, the third-party shop visit on LEAP will continue to grow and will be, let's say, between 10% and 15% in 2025. This is an important point because when we talk about third-party shop visit, this is the driver for, let's say, a spare part revenues for us on LEAP. So 10% to 15% third-party shop visit on LEAP in 2025. Pascal Bantegnie: And on your last question about the EPS, I would say guidance for the dividend calculation for this year. We usually, and we always, I would say, apply a 40% payout ratio on the adjusted net income to compute the dividend proposal. It is true that when we have noncash impairments affecting the net adjusted income, we would usually restate the net income from those. Typically, last year -- well, in 2023, sorry, we adjusted the net income by the impairment we had on the goodwill on the cabin and seats because it's a noncash item. And then once we have restated the net income, we apply the 40%. In 2025, the surtax in corporate tax is a cash item. So there is no reason to adjust the net income this year before we apply the 40% payout ratio because it is a cash item compared to a noncash item when we talk about goodwill impairment, for example. Operator: We will now take the first question. This is from Christophe Menard from Deutsche Bank. Christophe Menard: I wanted to come back to the tariff question. You mentioned Mexico and Canada. Two questions around tariffs. The first one is, do you have an idea of how many times your parts are crossing the borders in terms of the exchanges with Canada and Mexico. And the other element around tariffs is, what about tariffs on EU manufactured product, i.e., the engine parts. Is it something you've looked into? And anything from the 2020 situation when there were some tariffs that could be useful in terms of understanding the situation? And the second question was on your guidance, you actually lowered the FX rate. So it's a question on the sales guidance. You lowered the FX rate. So it should contribute to higher sales. Is it something -- I mean, you said around 10%, so it's around 10%, 13%, the same in your understanding of the guidance of sales? Pascal Bantegnie: Christophe, I will answer very quickly the second question. There is no change in our FX assumptions. Spot rates 110 and the hedge rates 112, exactly the same as we had at the Capital Market Day when we provided the preliminary guidance for 2025. In terms of spot rates, a EUR 0.01 change would impact our sales by about EUR 100 million. So typically, today, we are at a spot of, let's say, 1.04. So it's EUR 0.06 different from our own assumption, meaning that it could translate into an additional EUR 600 million sales, which is not in our guidance today. Olivier Andriès: Christophe, I will try to answer on the first question. But there are many parts, subassemblies, modules, flooring all around the world. As you know, we have a worldwide footprint. And so as an example, when we assemble the LEAP-1A engines in France to be delivered to Airbus, but we get the core from our partner, GE. So the core are flowing from the U.S. to Europe and then assembled within a complete engine in our facility south of Paris. On the other side, the LEAP-1B for Boeing are assembled mainly in GE facilities in the U.S., and we deliver to GE, the turbine model, which is coming from France, and the fan module, which is coming mainly from Mexico. And of course, submodules can -- when we have some activities, for example, in Mexico or in Canada, and we deliver equipment from there to the U.S., yes, indeed, we get some parts that could flow from the U.S. to Mexico to be assembled in Mexico or from the U.S. to Canada to be assembled in Canada and then go back to the U.S. as a complete equipment assembly. So it's quite a complex worldwide, let's say, vision. And of course, this is why we are very carefully monitoring what's going on to see the impact to, let's say, anticipate a bit and see how we can mitigate as much as we can those impacts. That's basically the plan. Operator: We'll now take our next question. This is from Samuel Burgess from Citi. Samuel Burgess: Firstly, can you just remind us on your expectation for a timeline on profitability in seats, that would be really helpful? And second question, the revenue guidance for '25 has remained flat, but our profit guide has clearly increased, which might imply a stronger aftermarket mix. Can you just give us some color on the rationale for this change? What's changed between now and December? Olivier Andriès: I'll take the first one on seats. As you know, and as you've seen at the Capital Market Day, the plan is to move up the profitability of Aircraft Interiors, let's say, to -- globally to double digit, especially on seats. So starting from a breakeven point for seats in 2024. So basically, we are targeting to be on this journey. And so we are targeting to have indeed an increased EBIT margin in 2025 versus 2024. So be in the black and yes, and be consistent with this overall journey. And of course, we are going to be focused on cash as well in order to improve the cash performance of our Aircraft Interiors business as well. Pascal Bantegnie: On your second question, on revenue guidance, there was no reason to change our revenue guidance for 2025. The only assumptions we raised between December and today is on the spare parts revenue moving from mid- to high single digit to high single digit plus, which has definitely a positive impact on revenue, but this is falling within the up around 10%. In your terms, I would say we should be close to EUR 30 billion in 2025. Remember that the FX assumptions we have is the euro dollar on average at 1.10 for the year. We understand today it's 1.04, so it's more favorable than our own assumption. But we'll see with time what is the average for the full year 2025. Operator: We'll now take our next question. This is from David Perry from JPMorgan. David Perry: Thank you for squeezing me in. Just one question. Any chance you could give some guidance on the propulsion margin in 2025, please? Pascal Bantegnie: We've reached a margin of 20.6% in 2024. We guided at the Capital Market Day that between '24 and let's say, the end of the decade, we aim to maintain the margin above 20% at a time where we will transition from the CFM56 aftermarket model to the LEAP service aftermarket model. In 2025, by the way, I could answer for all the 3 divisions, we aim to improve the margin rate in propulsion, still in the low 20s, but higher than what we had in 2024, continue to raise the margin rate by at least 0.5 points in equipment. And as we aim to reach more or less 10% operating margin in Aircraft Interiors in 2028, it means that we need to improve the margin by 1.5 to 2 points a year. So this is what we are aiming for 2025. So within all the 3 branches, we aim to improve the margin rate. David Perry: And just curious, you're willing to say up by 0.5 point in equipment, but in propulsion, you don't seem to want to guide. Can I be annoying and just try and push you? Pascal Bantegnie: It could be within, what, 1 and 2 points. David Perry: 1 to 2-point improvement in your propulsion margin in '25? Pascal Bantegnie: Yes, it could be a good target for us, yes. I mean it's a good time to also highlight that remember at the Capital Market Day in 2021, we've said that for '21, '22, '23, we were aiming to improve the margin by 100 basis points each and every year, and this is what we did. And we said at that time that in '24 and '25, we're aiming to achieve 150 basis points improvement. And as you can see, we did that in '24. And looking at our guidance, this is more or less what we should achieve in '25. So we are being in line with what we've said in 2021 despite a completely different environment in terms of inflation and supply chain. David Perry: So am I still on have you closed me off? Pascal Bantegnie: You're still on, David. David Perry: Sorry, sorry, just to make sure I'm not being stupid. You mean 100 to 200 basis points or you mean 0.1 to 0.2. Sorry to -- for that question. Pascal Bantegnie: I'm saying 1 to 2-point improvement in the margin rate starting from 20.6%. Olivier Andriès: So it's 100 to 200 basis points for the propulsion, that's what he said. Operator: So the last question today is from the line of Aymeric Poulain from Kepler Cheuvreux. Aymeric Poulain: I've got 3 questions, please. So on this propulsion margin, I think you highlighted the first recognition of LEAP aftermarket profit in 2025 and the catalyst of the HPT blade approval, does that change the margin contribution of the aftermarket? Is it a driver also of margin boost in 2025? Or is it too small to really matter this year? And then on the guidance, you do not obviously consolidate Collins yet, and you mentioned the potential sale of the Electrical business to Woodward. What this sale contribute today to the actuator business and what should be the net contribution to now assume for the equipment business? And last, I think there were some articles in the press mentioning an interest in Atos activities. So could you give us a bit of a feel for the pipeline of M&A, both disposal and potential acquisition that the group is looking at right now? Olivier Andriès: Aymeric, I will give you a quick answer on your third question. The answer is no. And by the way, we have communicated that we -- I mean, we have no interest in looking at Atos assets. So we've denied. Pascal Bantegnie: On your first question, it is true that as we said at the Capital Market Day, the trigger event to recognize and start recognizing profits on LEAP-1A RPFH contract was the introduction of the Maverick, so the new HPT blade on the LEAP. Now that the blade is certified, I confirm that we will start to recognize some profit only on LEAP-1A today RPFH contract. Frankly, this is not material compared to the overall EBIT guidance we gave. So it will not make any change to the margin rate in the propulsion division. On your second question, we will provide an updated guidance if we close that deal by midyear on the Collins/Woodward, net effect on the accounts. Just to remind you, purely on Collins' activities, it's about a $1.8 billion revenue it was in 2023. So we'll provide an updated guidance on what will be the impact. As you know, the guidance we are providing today excludes any impact from the Collins acquisition. Thank you all, and happy Valentine's Day. Olivier Andriès: Thank you. Have a good day.

Operator: Welcome to the Safran Third Quarter 2024 Revenue. At this time, I would like to turn the conference over to your host, Olivier Andriès, Safran's CEO; and Pascal Bantegnie, Group CFO. Mr. Andriès, please go ahead. Olivier Andriès: Thank you. Good morning, everyone and thank you for joining us for Safran's third quarter 2024 call and I'm here with Pascal. Let us go straight to the key highlights. In the first 9 months of 2024, we delivered strong performance with a 17.4% growth in revenue. This performance was mainly driven by a solid level of services for aircraft equipment and for engines with civil aftermarket increasing by 26.2% in dollar terms. On the other hand, LEAP deliveries were up sequentially with 365 deliveries in Q3 2024 but remained below expectation due to supply chain bottlenecks in specific areas that still require improvement. In terms of portfolio management, we completed the acquisition of Preligens, a leader in artificial intelligence technology which is now part of Safran Equipment & Defense. Furthermore, we announced the contemplated acquisition of a U.S.-based company, CRT, a world leader in the repair of aircraft engine parts. This move clearly reflects our plans to ramp up our global MRO network and further strengthen our MRO capabilities in America. Despite revised downward expectation for OE deliveries on narrowbody, the strong performance in the first 9 months of the year enables us to update our full year 2024 outlook. We now anticipate revenue around €27.1 billion and we raised our EBIT forecast to €4.1 billion. The cash guidance is unchanged but remains subject to payment of customer advances. Turning to Slide 4, let me give you an overview of Safran's Q3 and 9-month sales for 2024. In Q3 2024, revenues stood at €6.6 billion, an increase of 14% compared to Q3 2023. Level of services remains strong across all activities with civil aftermarket increasing by 20.5%. OE sales benefited from ramp-up but were limited by supply chain constraints and downward revision in demand. As shown by the revenue increase in the first 9 months of the year, the group is continuing on its growth trajectory with a 27.4% [ph] growth added around €3 billion of additional revenues. Turning to Slide 5, let me share with you some of our key recent business achievements. VietJet Air has renewed its commitment for an order of over 400 LEAP-1B engines for its 737MAX fleet, including additional spare engines. This partnership underscores our continued presence in the dynamic Asian market. In helicopter engines, we continue to build momentum. The Arrano 1A helicopter engine was recently certified in China, marking an important milestone for the engine's presence in the civil market. Additionally, in India, Safran, through its joint venture with Hindustan Aeronautics Limited, HAL, has entered into a partnership to develop and produce the Aravalli engine which is a new-generation, high-power engine for India's new heavy helicopter platform, a 13-ton helicopter. Serbia signed a contract for 12 Rafale fighter jets powered by our M88 engines which brings M88 orders to more than 1,000 units since the inception of the program. It confirms Rafale as an essential vector of national sovereignty. Hanwha in Korea, who provide the Redback Infantry Fighting Vehicle to the Australian Defense Forces, has selected our PASEO Joint Fires solution. This solution will enhance the vehicle's long-range surveillance and target acquisition capabilities. It is another strong example of our defense portfolio relevance in the global market. Let me now hand over to Pascal for more details on Q3 sales. Pascal Bantegnie: Thank you, Olivier. Good morning, everyone. Starting with FX. After fluctuating around the 1.12 level during the third quarter, the euro-dollar rate has returned below 1.10 which is favorable in the long term for the group. We continue to hedge our 2028 exposure which is now mostly fully completed. For 2024, we confirm a hedge rate of $1.12 per euro which is $0.01 better than what we had in 2023. The average spot rate in Q3 '24 at 1.10 was slightly above its level in Q3 '23 at 1.09. This translates into a negative impact on sales of nearly €45 million. Turning to Page 8. As Olivier said, Q3 revenue reached €6.6 billion, up 14%. You can see that the scope and currency impact almost offsets each other, so the organic growth is 13.8%. This is an incremental €800 million of revenue year-over-year. Half of that is coming from Equipment & Defense. In the third quarter, OE and services grew at the same pace, meaning 14%. The revenue growth momentum observed in the first half, 19%, slightly slowed down in Q3 with lower-than-expected deliveries in the narrowbody segment. On Slide 9, we provide a few details for activity. Globally, in Propulsion, revenue reached €3.3 billion, up 9.2%, where OE deliveries were flat. We've delivered 365 LEAP engines, a slight improvement from Q2 but still below the expected level. The annual forecast is revised downwards to approximately minus 10% and this guidance assumes ongoing deliveries to Boeing. It was, to some extent, offset by additional volume on military engines, especially M88 and helicopter turbine deliveries. On the service side, revenues were up 13.3%, driven by civil aftermarket, up 20.5%, driven as planned by the LEAP RPFH contract growth and to the spare parts growth, both in CFM56 and widebody engines. Specifically on CFM56, shop visit volume was up, in line with our full year view. 1st of August, we had our price escalation in the high single-digit percentage and the work scope was pretty stable. To a lesser extent, the service growth is also coming from the military aftermarket, both for spare parts and services. Equipment & Defense revenue grew to €2.5 billion, up 16.3%. OE revenue was up 19%, driven by ramp-up in OE deliveries across key programs such as the A320neo for nacelles and electrical systems, 787 for electrical systems and the G700 of Gulfstream for nacelles as well as avionics. Services were up 12.6%, supported by all activities and, I would say, as usual, notably by the carbon brake activities. Aircraft Interiors performed strongly with revenue at €771 million, up 28%. OE revenue was up 30%, driven by a remarkable uptick in business-class seat deliveries. Almost 600 units were delivered in Q3, continuing on the positive trend from the second quarter where we shipped 500 units and it compares to 174 units being delivered last year in Q3. Services revenue was up 25%, largely supported by demand for spare parts for both Cabin and Seats. And we've seen a strong demand from Asian and Middle East airlines benefiting from the growth of the widebody market. Turning to Page 10, I would like to comment 2 additional topics. First, we've executed the first tranche of share buyback of €250 million last summer. We repurchased a total of 1.3 million shares. We have since launched a second tranche of €500 million that we will complete by early December. All shares that we repurchased during these 2 tranches will be canceled by year-end. At the current share price, it is likely to be in the order of 3.6 million shares which is about 0.8% of equity. And then the final tranche of €250 million will be executed in H1 next year. Second, regarding potential new tax measures in France based on the draft Finance Bill published early October, we now estimate an additional current tax expense for 2024 in the range of €320 million to €340 million which represents €0.75 a share, with the related cash outflow in 2025. We could also be impacted marginally by 2 other measures introduced into the draft Finance Bill: first, a new registration fee on share cancellation; and second, the postponement of the abolition of the tax known as CVAE. All this is under review by the French Parliament at this time. Olivier, back to you. Olivier Andriès: Thank you, Pascal. Based on this strong 9-month performance, we are raising our recurring operating income outlook to around €4.1 billion compared to close to €4 billion previously. On the other side, in light of downwards expectation for OE deliveries on narrowbody, we are now targeting €27.1 billion of revenue compared to €27.4 billion previously. The cash forecast is maintained even though we faced some pressure on advanced payment and inventories. This revised guidance is based on a couple of underlying assumptions. LEAP engine deliveries are now expected to be down 10% in 2024 compared to flat to plus 5% previously, reflecting ongoing supply chain bottlenecks. The group priority remains to best meet customer needs and unlock supply chain constraints. Before we answer your questions, let us conclude with a save the date for our Capital Market Day on December 5, 2024. We would be delighted to ask you either online or in person at our Safran Campus near Paris upon preregistration to share exciting news for the coming years. Our investor relationship team will help you prepare your venue. I thank you for your attention and now Pascal and I will be very pleased to answer your questions. Operator: [Operator Instructions] We will now take our first question, this is from the line of Aymeric Poulain from Kepler Cheuvreux. Aymeric Poulain: On the free cash flow guidance that is unchanged, you say lower advances and higher inventories. However, I think you got some advances from the Serbian Rafale order. So is it mostly due to the LEAP delivery and the effects related to that? And as a follow-up, what would be the impact of a prolonged Boeing strike in terms of destocking effect on Safran's figures earlier next year, for example? Pascal Bantegnie: Aymeric, this is Pascal. Free cash flow, we do maintain our full year guidance of €3 billion. As we've said back in July, there is still uncertainty around that number. But as we move closer to the 31st of December, there are 2 months to go now, we are more confident that we can hit that target. The uncertainty we had was about the predelivery payments on the LEAP-1B given the situation at Boeing. Now we feel reassured because Boeing is taking deliveries of all LEAP-1B engines that we ship to them. As you rightly said, we signed the Rafale contract in Serbia and there was also uncertainty about the payment of the first advanced payments. We did receive last week a few tens of millions with respect to that contract. So we have much more certainty today about our cash situation. That's why we are reiterating, confirming our full year guidance. Olivier Andriès: Aymeric, with respect to the Boeing strike and impact on inventory, the fact is that the Boeing situation in 2024 basically has created a lower demand from their side compared to what we had in mind at the beginning of the year, plus the bottlenecks on the LEAP side probably created a situation where we have a high level of inventory as we speak. Now we'll, for next year, we'll be mindful of making share. We soften a little bit the impact on our own supply chain because we need to make sure that our supply chain will be ready to restart and to ramp up once we need. So basically, we want to make sure that we soften a little bit the impact of those shocks on our own supply chain. Pascal Bantegnie: And I will add on the cash side because you were talking about 2025 as well that there is an additional tax expense in the P&L in 2024 but the cash outflow will be in '25. So be aware that the €320 million to €340 million additional tax will be cashed out in 2025. Operator: We'll now move to our next question, this is from Ian Douglas-Pennant from UBS. Ian Douglas-Pennant: Ian at UBS. Firstly, on your LEAP deliveries, so you've got LEAP deliveries down year-over-year but OE sales up. Could you help us square those 2 against each other and, in particular, the ratio of engines that you're selling as spares and how that has changed over the year, please? And secondly, the supply chain issues that you're talking about in the release and just now with regards to engines, how important is the HPT certification to unlocking those issues? Olivier Andriès: Ian, on the deliveries on spares, we are still at a level which is higher than basically what we have experienced on the CFM56 globally during the life of the CFM56. So basically, I would say it's double-digit share of the overall LEAP deliveries, low double digit. So the LEAP deliveries are down. It is impacting as well our spare engine delivery. As you know, we have to serve 2 types of clients, our airframers clients but also our airline clients that want us to ensure that we keep them flying. And so every week, it's a decision of allocation to make sure we serve as best as we can our 2 type of customers. Supply chain still paced -- LEAP delivery is still paced by HPT blades. Yes, as we discussed in July, the situation is improving. The yield has improved compared to where we were in Q2. So there is an improvement but which is below what we had expected and what we had needed basically to keep the previous guidance. So that's where we are. We are expecting, as our partner said in its own communication, we are expecting in the coming weeks a very important event which is going to be the certification of the new blade. So it's a matter of weeks now. This will help us going forward, for sure. This will help us, yes. This will help us. Now as our partner said, it will be a step. It will not suddenly unlock everything but it will be a very important step forward. Operator: We'll now take our next question, this is from George Zhao from Bernstein. George Zhao: First, on guidance, civil aftermarket growth outlook unchanged. We don't have the Q3 profit to get a better sense of the quarterly performance. But what exactly changed between last quarter and now to drive the EBIT guide increase? And second, on civil aftermarket growth, so once again, you said that it reflected another strong increase in LEAP RPFH contracts. But unlike the 2 prior quarters, the 20.5% growth this time around seemed in line with the implied guide. So with the impact from the RPFH on Q3 growth, was that less than the impact on prior quarters? Or asked another way, what was the growth of the CFM56 and high-thrust spares in Q3? Pascal Bantegnie: So as I said, last July, from the Capital Market Day and starting in 2025, we would break down our civil aftermarket into likely 2 parts to give you more clarity on the trends on spare part sales which drive most of the profitability of the group; and services, services being partly on the RPFH for the LEAP for which we do not recognize any EBIT yet. So I understand that it could be a bit confusing. That's why we'll provide more clarity. With respect to the first 9 months of 2024, I would say that what we see on the spare parts side of the business is in line with our expectations, I would say, in the mid-teens growth, revenue growth, okay -- which is part of -- building blocks are stable work scope, high single-digit growth in pricing and volume growth, okay? It applies to CFM56. It could even be slightly higher when we speak about widebody engines. Then on the services, we are still in the much higher growth rates between 40%, 50%, more like which is triggered by a low comparison basis. Last year, we are starting off from very low numbers. So this is why the growth rates are so impressive to some extent. But again, this is not driving any change in profitability. Operator: We'll now take the next question, this is from Olivier Brochet from Redburn Atlantic. Olivier Brochet: I would have two, if I may, please. I would like to come back on the Boeing topic and ask what the effect on equipment -- on the equipment side could be? And also, if I could come back on the LEAP deliveries, you said that you continue delivering engines to Boeing but you're cutting the guidance quite sharply in volumes. Does it mean that the Q4 numbers will be materially impacted? And second question, Chromalloy announced some new stuff in HPT blade for the V2500 from your competition and efforts on the CFM56. Could you discuss the PMA threat on this one in particular, please? Olivier Andriès: Thank you, Olivier. So Boeing keeps -- we keep delivering LEAP engines to Boeing. So Boeing does accept LEAP engine deliveries. But considering the situation, you understand that basically, we will deliver less LEAP engines to Boeing. That's what we had planned at the beginning of the year. So this is part of the overall situation because the demand has been lowered. But we keep delivering LEAP engines to Boeing. On the equipment side, we are on board, let's say, Boeing platform. On the 787, we keep delivering landing gear to the 787 because the 787 is not impacted by the strike in Charleston. We are delivering wiring kits for the Boeing 737MAX. And yes, indeed, those -- the shipset deliveries have been suspended during the strike. So we expect the strike to basically stop within weeks. So we will -- as you know, an agreement has not been reached. The vote has been negative this week but we expect the discussion to restart soon. And we expect that an agreement will, at the end of the day, be found in the coming weeks. So we are prepared to restart delivering our equipment shipsets. On LEAP deliveries, the minus 10% outlook that we see basically takes into account a sequential improvement in Q4 versus Q3, for sure. But it is taking into account the current supply chain situation on the LEAP and especially the bottlenecks on the HPT blade. PMA, yes, we are well aware and we are well aware of the Chromalloy and Fortress initiative. They have been lagging with their own certification, as you know. We -- of course, we are mindful of it. But once again, let me highlight that 50% of the fleet is owned by leasing companies. And the leasing companies, they care about the re-sale [ph] value of their engines. And so they don't like PMA. And those PMA initiatives only address a portion of the spare parts. It does not address the LLP which is basically the most significant part of -- the most significant element of our spare parts. So we are following that. And we, of course, we have commercial proposal basically to remain attractive to our airline customers in face of these initiatives. Olivier Brochet: Yes. Could I ask how many LEAP engines you think Boeing has in excess of its needs at the moment? Olivier Andriès: We are not communicating on that but it's -- well, okay, it's, let's, typically a 3-digit number. Olivier Brochet: Low 3-digit number? Olivier Andriès: It's a 3-digit number. Operator: We'll now take our next question, this is from Chloe Lemarie from Jefferies. Chloe Lemarie: I have 2 as well, if I may. The first one is on the timing of payment on the LEAP-1B, could you remind us roughly what's the phasing? What is due when you deliver going versus when they deliver to airlines because I think that has changed since the beginning of the program? The second one is on seats. So business-class seats were up massively in the quarter. So could you share with us what helped you achieve this, whether it was certification of some model achieved? And given that we've seen pretty limited widebody deliveries in Q3, whether this was largely retrofits? Pascal Bantegnie: Chloe, on your question about payments from Boeing on the LEAP-1B, we do receive a share of prepayments received by Boeing from the airline a long time before we start delivering the engine. So CFM does receive a fixed portion of the advanced payment Boeing is receiving. And then at delivery of the engine, we do receive the complement in pricing. So we have the full cash impact when we deliver the engine, not when Boeing is delivering the aircraft. Olivier Andriès: Chloe, on seats, basically, we are today in a period where we deliver shipsets our business-class seats that have been certified earlier either end of last year or beginning of this year. So we are in this phase of production, if you wish. We still have ahead of us seats to be certified but we have entered in a more significant period of production. And we are delivering both for line fit and retrofit. Indeed, we have 2 demands. We -- the line fit demand and following the ramp-up of the widebody aircraft, both on the A350 from Airbus and the 787 from Boeing, A330neos as well. And also there is a significant demand on the retrofit side. Typically, because the widebody deliveries overall have lagged a bit versus airline expectation, some airlines have decided basically to retrofit their current widebody aircraft. And so we have to serve that demand as well. So it's a significant pickup. But as expected, it's a significant pickup of business-class seats deliveries this year compared to last year. Operator: We'll take our next question, this is from Ken Herbert from RBC. Ken Herbert: Two questions, if I could. First, can you comment on how many of the new HPT blades you potentially have in inventory that could be ready to ship when you get certification there? And then my second question is on CFM56 pricing, have you seen any change in airline acceptance or pushback on the high single-digit price increase on CFM56 material maybe more this year relative to prior years? Or has there been any inflection in your airline customers' acceptance of the pricing on the CFM56 spare parts? Olivier Andriès: Ken, there's certainly an inventory of new HPT blade. As you know, we are expecting the certification of this new HPT blade within the next weeks. And so as soon as these blades are going to be certified, we'll be ready to ship, let's say, some of them, especially for the MRO market. I will not quantify. But yes, there's new HPT blades already available. On the CFM56 pricing, as you know, we are mindful of making sure that our price increase remains acceptable to the market. We know there's a very significant demand for spare parts. As you know, as the level of retirement of old aircraft retirement has been low, basically, the used market -- the used part market has not been fed and so there's not many used parts available today in the market. So, this is -- this provides a good momentum for new spare parts. But we are mindful of basically making sure that those price increase remain rational, if you wish. So we have not seen any pullback today. Operator: We'll now take our next question, this is from Ben Heelan from Bank of America. Ben Heelan: The first question I had was on the supply chain situation right now across equipment and on the interior side. So if you look at the A320neo landing gear deliveries, they were down a little bit in the quarter. Is there anything just generally across those 2 divisions that is particularly holding things up right now or particularly a significant bottleneck that we need to be thinking about? And then the second question, you kind of touched on it, Olivier, about supply chain and managing the supply chain through LEAP. But I think in the past, you'd kind of highlighted that you were in a position to deliver roughly 2,000 shipsets on the low-pressure modules for the LEAP this year. That supply chain has actually been performing relatively well. As you roll forward over the next 6, 12, 18 months, are you keeping the supply chain at a relatively elevated level on LEAP so that there's some ramp-up in '25 and '26? Or is there going to be some risk of destocking over the next 12, 18 months that could also put some pressure on that supply chain there? Olivier Andriès: Thank you, Ben. A lot of questions. The supply chain is progressively -- the supply chain situation is progressively improving but not to a point where, basically, I can affirm that the supply chain issues are going to be completely behind us in 2025. But it is progressively improving. The number of critical situation and what we call black situation is decreasing today. As we speak, we still have about 20 suppliers that we follow very carefully that are critical, if you wish, for our overall performance across the board on engines and aircraft equipment interiors, about 20 suppliers that -- critical suppliers that we follow very, very tightly. So that's one. And we are -- as I already mentioned, we've been reinforcing our supply chain management team, doubling up the number of our supply chain managers, deploying tools and what we call our One Safran operating excellence methodology to help our suppliers move forward. So that's one. You mentioned the landing gear. And yes, indeed, I had mentioned the landing gear situation as a tough one, especially for the A330, not the A320 but the A330neo in the first half of this year. We are back on track. And so basically, on the A330neo, now we are delivering on rate 4 [ph] as expected by our customer. We've not been pacing on landing gear on both A320 and A350. But once again, we are following very carefully our overall supply chain there. We will end up this year with a high level of inventory, for sure, for 2 reasons. The first reason is the consequence of the Boeing situation because basically, even if we continue to deliver LEAP engines, basically, we've delivered less LEAP engine than what we expected at the beginning of the year just because they don't need them. But we are still delivering, as I said and also because of the overall LEAP situation and the bottleneck on the HPT blades. So yes, indeed, we have a high level of inventory on the low-pressure side of the LEAP. So we could still wait to really take the decision to basically decrease our inventory next year but that would impact badly our suppliers. So basically, we have decided to soften the impact vis-à-vis our own supply chain because we are -- we want to make sure that our suppliers will continue to accompany us for the ramp-up because the ramp-up will be there, will be there for both Airbus and it will restart on the Boeing side as well. So we need to be careful vis-à-vis our own supply chain and want to make sure to soften a little bit the impact in order to keep them aboard and running. So we are going to try to basically manage our inventory next year, of course, with the view to decrease the rotation, as we say, in terms of inventory, in terms of days of revenues. So we want to make sure that we are going to manage and decrease our rotation indicator. But in absolute terms, we will make sure to soften a little bit the impact on our own supply chain. We have our own responsibility with this supply chain. Ben Heelan: That's very clear, Olivier. Just a quick follow-up on the interior side. Like Chloe mentioned, the business-class seats have seen a very significant increase in the last couple of quarters. If you think about series deliveries and economy seats and areas like that, do you feel that they are potentially gating items to deliveries at the OEMs at the moment? Pascal Bantegnie: No, we have not -- Ben, this is Pascal. We have not noticed any black points on the economy seats at this point. So... Olivier Andriès: We are experiencing a significant ramp-up at the moment on both business-class seats and economy seats. No specific black point. Now I have to also say that certification remains a challenge, not only for us but for the overall aircraft interior providers and seat providers as the certification authorities have decided to tighten their criteria. So it remains a challenge, the certification. Operator: We'll now take our next question, this is from Christophe Menard from Deutsche Bank. Christophe Menard: A follow-up on the seat situation. I mean we heard from OEMs that seat suppliers can be a pacing item basically to deliveries. Given the surge in deliveries that we've seen in the year, would you consider yourself still as a pacing item? I think it was a little bit the question before but I just wanted to make it clear. Second question was on FX. When do you think you will be able to narrow the range of hedging next year and the year after? You're still in 1.12 to 1.14. And the last question is on the portfolio adjustments. I understand that you may be looking at disposing of Roxel or your stake in Roxel while looking at CRT in the U.S. Can you give us a little bit more details on that CRT acquisition, the strategy you have behind it? And is it part of your bigger MRO plan basically in terms of developing your offering? Olivier Andriès: So Christophe, as you've seen from our numbers, we are at the moment in a significant surge of deliveries of business-class seats and economy-class seats for -- especially also for line-fit and widebody aircraft. So yes, it is one of the potential pacing item for widebody deliveries. It's still a challenge ahead of us for the weeks to come. We -- and so we are putting in place all the resources to make sure we deliver on time our shipset to the airframers but also, we are providing what we call on-site support to the final assembly line to make sure that we fully support our OEM customers before the handover to their own customers. So it's a race for the weeks to come. And we've been putting in place all the necessary resources to be by our customers' side and make sure we will not impact their own deliveries. But it's a challenge. It's a race, yes. Portfolio management. So Roxel, we have signed an agreement to sell our 50% share of Roxel to MBDA. MBDA is, by large, the main customer of Roxel, by large. And so it is making sense for us that we sell our share to them. And basically, we've got to an agreement with an adequate price for this share. So we expect this deal to be closed by the end of this year. But though, what is the rationale behind the CRT acquisition? CRT is a recognized, let's say, provider of repair solution, repair engine solution, especially on casing. So they are suppliers of us for the CFM56. There will be a supplier for LEAP as well. They are doing repairs also for high-thrust engines. And so they are recognized as to be one of the best experienced company for those repairs. As you know, we are today in a race as well to significantly ramp up our MRO capabilities and get prepared for this huge need that we will have for LEAP. There is going to be a significant number of shop visits for the LEAP. We see today the surge of LEAP shop visits. And so we have decided to invest more than €1 billion to increase our MRO capabilities, not only for the engine maintenance but we have also decided to be a strong player in the repair capabilities. So it's both sides, if you wish, engine maintenance shops. So we've taken the decision to, basically, to build new shops and to extend our existing shops. You may know that we have already communicated on India, a new shop in India, an extension of our shop in Mexico. And we are going also to soon announce, let's say, very soon a next decision on this one but repair as well. And so it makes complete sense for us basically to get into the casing repair. It's a significant part of the repair solution through the acquisition of CRT. And we have decided also to be present in the 3 main geographical areas: the Americas, Europe and Asia. Pascal Bantegnie: On your last question, Christophe, as we usually do, we'll provide a midterm guidance at the next Capital Market Day and FX is one of the underlying assumptions. So we'll provide a crystal-clear assumption about our FX hedge rate going forward. Operator: We'll now take our next question, this is from David Perry from JPMorgan. David Perry: Can I ask 2 questions, please? The first, could you just give us a bit more color on M&A, so any details you can share on CRT in terms of its sales and EBIT and also an update on Collins and the timing of that deal, if you think it's going to close? And then, the second question is a bit more conceptual. And I know you won't want to say too much ahead of the CMD but I just want to think about LEAP aftermarket margins going into that event. And I just want to ask you, would you agree that your accounting just seems very conservative compared to your peers, not just GE but all the other engine companies? And is there any particular reason for that? Is it purely your choice? I'd just be interested in any conceptual comments you may be willing to share on that. Olivier Andriès: David, I will start with the first one. CRT, it's about 500 people. If I remember correctly, it's I think around €200 million of turnover, around both -- it's mainly aircraft engines. So customers are CFM, CFM56 and LEAP. And GE is also one of the customers for the CRT for the high-thrust engines. On Collins, we have filed on the CQ side [ph] and the change of ownership side with the relevant authorities. We fixed the situation in Italy, as you know, earlier this year. And we are getting prepared. Hopefully, we plan to file for the antitrust side. We are prepared to file by the end of this year, hopefully. So today, as we speak, we expect, let's say, a closing to occur by, let's say, H1 2025, I would say. As you know, on the antitrust side, basically, we need to fix some potential issues on the antitrust side and this is what we are doing today. This is where we are focusing today. So we want to make sure that once we file, basically, we have answered and found responses to all the potential questions of the antitrust authorities. And so this is where we are focusing today. Pascal Bantegnie: David, on your second question, as you know, the LEAP RPFH contracts are CFM services contracts, meaning within the CFM agreement, 50-50, GE and Safran. This is why the margin at completion of all our book of contracts is the same either at GE or Safran. You won't see more profits at any other partners. It will be the same profit at the end of the day. The main difference, it seems to be the way we will account for profit going forward. So we know it will be the central theme of the next Capital Markets Day. I will not say that we are very conservative. But given the maturity of the engine, the fact that we are introducing in 2025 the new HPT blade that is aiming to more than double the time on wing for LEAP-1A and then in 2026 for the LEAP-1B, we are still in the early days of that engine, we believe on our side that it is cautious to maintain some contingency going forward, not too much contingency. That is why very conservative seems a bit not the right wording to me but we want to keep some contingencies that we will release over time. But at the end of the day, we will have exactly the same profit, dollar profit than our partner because it is a CFM service contract. Yes, please go ahead. David Perry: If I can just probe a bit more around it. MTU has sent an agenda out for their CMD and it says that they're going to guide all the way through to 2030 which is longer than we normally see from companies but it kind of makes sense to me given the longevity of programs. I just wonder how you're thinking about framing your CMD. I mean it sounds to me from the way you're recognizing margin, your comment just now on the LEAP-1B new blade kicking in from '26, that maybe we're not going to see the full LEAP benefits if you guide '27 or '28. I mean, is there a framework for how you're going to guide? Are you going to also extend the envelope just so that we can kind of prepare our expectations? Pascal Bantegnie: Yes. So what we will do is to provide a guidance for 2028 which is exactly what we've done in the previous CMDs. So the financial guidance will be 2028. And then as you rightly said, most of the profits that are embedded into our LEAP RPFH contracts will come after 2030. So this is why we will provide also some indication on 2030 and likely 2040 to give you a sense of how big is the opportunity for the LEAP RPFH compared to what we had historically on CFM56 because we are clearly very excited about the LEAP RPFH and globally led aftermarket business. So we need to give you a long-term view to discuss with you what is the shape of profits and opportunities going forward; so I guess it is a bit compared to MTU. David Perry: Yes, I look forward to it. Pascal Bantegnie: Yes, me too. Operator: We'll now take our next question, this is from Herve Drouet from CIC Capital -- sorry, CIC Market Solutions. Herve Drouet: Quite a lot of questions have been already answered. I will take two. The first one will be on tax. Just want you to confirm, firstly, if there will be as well an estimation on the tax to be taken on the 2025 numbers? And will it be half of what you guided of this around €320 million to €340 million? So are you expecting half as well to be booked in '25? And also on the tax side, do you expect any impact from your share buyback? I think you still have €725 million to be done. Is there going to be potential tax on that with the new financial law that can impact you? And will it be just marginal? Or could it be meaningful for you? And the second question is, again, on LEAP and also profitability. At the moment, do you book any profit for the OEM LEAP? Or is it booked as a loss? And if it is at a loss, out of your increase of the guidance in the EBIT of €100 million, how much is coming from your reduction of delivering of LEAP if it is at a loss? Pascal Bantegnie: Herve, on the tax side, on corporate tax, yes, indeed, it deems to be temporary over 2 years. So as I said, a 41.2% surtax applied in 2024 with a cash outflow in '25. And then half of that, so the surtax should be 20.6% applied in 2025 being cashed out in 2026. So it's a bit early but I would have a guesstimate of nearly €500 million for both years, a bit more than €300 million in the first year and the remaining in 2026. But it's, I guess, a rough estimate that I can make. Then it is true that there will be a registration fee applicable to certain capital reductions, clearly applying this registration fee to the reduction of share capital coming from the repurchase shares that we will cancel. It is deemed to be less than 1% of the total repurchase amount. So we are expecting to repurchase €750 million of shares this year. We will cancel these shares by year-end. So the tax we are prepared to pay is a couple of millions, I would say. Then on LEAP, as you rightly say, we book a loss for all LEAP OE deliveries. So part of the guidance upgrade is definitely coming from less LEAP engines being delivered. Herve Drouet: What -- could you give us a percentage of this? Pascal Bantegnie: No. No, no. Olivier Andriès: No. So the point to highlight is with the combination of the -- on the LEAP OE side, we are globally breakeven because of the combination of the installed engine that we deliver to the airframers on which we have a loss and the spare engine that we deliver to the airlines where we make a profit. So the overall balance is breakeven. Operator: Our last question is from Olivier Brochet from Redburn Atlantic. Olivier Brochet: I just had a quick follow-up on the HPT blade. Is the certification dependent on what is happening at Boeing in terms of the strike? Olivier Andriès: Olivier, no, not at all. The certification that we are expecting in the weeks to come is relating to the LEAP-1A. So we expect the certification of the new blades for the LEAP-1A at the end of this year and we expect the certification of the LEAP-1B for Boeing at the end of next year. And yes, we will need Boeing's support for that but this is planned for the end of next year, end of 2025. Olivier Brochet: Okay, perfect. Thank you. Pascal Bantegnie: Thank you all and looking forward to seeing you at the Capital Markets Day, especially David. Bye-bye, guys. Olivier Andriès: Have a good day. Thank you. Operator: Thank you. This concludes today's conference call. Thank you for participating and you may now disconnect.

Operator: Welcome to the Safran First Quarter 2024 Revenue. At this time, I would like to turn the conference over to your host, Olivier Andries, Safran CEO; and Pascal Bantegnie, Group CFO. Mr. Andries, please go ahead. Olivier Andries: Good morning, everyone. Thank you for joining us to Safran's first quarter 2024 call, and I'm here with Pascal. So let's go straight to the key highlights for the quarter. The air traffic good dynamics continues. Narrowbody air traffic ended the quarter at 113% of 2019 level, widebody at 94%. We expect widebody air traffic to fully recover by the end of this year. These good trends support the positive momentum in original equipment and services across all our businesses. We enter 2024 with a soft aircraft production level, with production rates expected to increase going-forward. We post today solid revenue growth in Q1 2024, in line with our full year guidance. This performance was mainly driven by services with notably civil aftermarket up by 27.3% and also by original equipment deliveries in Equipment & Defense. We closed the acquisition of Air Liquide aeronautical oxygen and nitrogen activities in February. We remain focused on meeting our customer commitments, mitigating short-term challenges on volumes and are confident in our ability to deliver our 2024 guidance. Turning to slide four. Let me give an overview of Safran's Q1 sales for 2024. Revenue is up 18% at EUR6.2 billion. We enjoyed double-digit revenue growth in all divisions. Services performed well across the board and in particular, in civil aftermarket, which grew by 27% year-on-year in U.S. dollars and by 12% compared to Q4 2023. This growth was mostly driven by long-term service agreement for both CFM56 and LEAP and is consistent with our full year guidance at 20% growth. OE performance was mainly driven by Equipment & Defense on a low comparison basis. LEAP deliveries were flattish year-on-year, reflecting a soft start of aircraft production. Taking into account this operating environment, we revised our LEAP delivery forecast from plus 20% to 25% growth to plus 10% to 15% for 2024. Turning to slide five, business highlights. Some of our main business successes since we last spoke in February. On civil engines, CFM signed a service agreement with American Airlines on more than 400 LEAP-1B and the Chinese aircraft leasing company, CALC, placed an order for 40 LEAP-1A. With respect to LEAP durability, CFM has shipped the first LEAP-1A outfitted with its new reverse blade system to Airbus. In Helicopter Engine business, we enjoyed a strong commercial momentum. We signed the support-by-the-hour contract for 50 Arriel 2E with ADAC Heliservice, which supports leading actors in helicopter rescue and medical transport in Germany and Netherlands. We won a new contract with the U.K. MOD to continue to support the RTM322 engines, powering the Royal Navy's fleet of Merlin helicopter for a further six years. And we have renewed our contract with the U.S. Coast Guard to support more than 240 Arriel engines, and Bristow Group selected Arrius 2B2 engines and support-by-the-hour contract for their new H135 fleet. In military engines, Safran and Qatar Armed Forces signed a support agreement for the M88 engines powering their fleet of 36 Safran. In our equipment business, we continued to sign several service agreements across all our activities, notably electrical harnesses with Malaysia Airlines Berhad, Nacelle with Cebu Pacific and flyadeal. Let me now hand over to Pascal for more details on Q1 sales. Pascal Bantegnie: Thank you, Olivier. Good morning, everyone. Starting as usual with FX, the USD remained strong in the quarter, given the geopolitical context and interest rate expectations. Currency volatility is also on the rise. These two trends provide a favorable FX environment for Safran when it comes to hedging its exposure. So for 2024, we do confirm our hedge rate target of $1.12 per euro, which is $0.01 improvement compared to last year. Specifically, in Q1 2024, the average spot rate of 109 compares less favorably to Q1 2023, resulting in a negative impact on sales of about EUR50 million. Turning to page eight. Q1 revenue stood at EUR6.22 billion, a solid 19% organic growth or 18% when taking into account the negative translation impact from the USD. Also, the net impact in revenue is neutral at group level. Change in scope reflects the divestment of Cargo and Catering activities from Safran cabin last May and the acquisition of Thales Electrical Systems in October 2023 within Equipment & Defense. On slide nine, let me provide a few details per activity. Propulsion revenue stood at EUR3.1 billion, up 15% organic. OE revenue was up 10%. As Olivier already said, LEAP volumes were flat year-over-year at 367 units, reflecting the soft start of the year of aircraft production. In the same vein, helicopter engines and military engines had a soft start as well as expected. Revenue growth was mainly driven by favorable pricing and mix and positive volume growth in widebody engines, plus 50% year-over-year. Service revenue was up 19% organic, mainly driven by civil aftermarket. Let me clarify the drivers behind the 27.3% gross performance. The sales coming from either CFM56 or GE90 spare part came in line with expectations, meaning positive volume growth and pricing, but no change in work scope. This significant performance is all attributable to CFM long-term service agreements. We did experience additional costs in some contracts, leading to additional revenue as we recognize revenues as the cost incurred. So this is a phasing effect that will reverse as soon as Q2. And as you all know, Safran does not recognize any profits yet on these contracts. So on a full year basis, the Q1 performance has no impact on our full year guidance of plus 20%. Outside civil engine services were slightly up in helicopter and military engines. On Equipment & Defense, revenue stood at EUR2.4 billion, up 23% organic. This is a much better growth than in Propulsion as it faces a weaker comparative. OE revenue was up 27% organic, benefiting from the strong ramp-up in deliveries in narrowbody and widebody programs for landing gear, power and wiring activities and nacelles. Services were up 17% on all activities, notably carbon brakes, nacelles, landing gear spares and MRO. Electronics & Defense activities were strongly up in the quarter, led by higher deliveries in avionics, guidance systems and optronics activities. On Aircraft Interiors, revenues stood at EUR676 million, up 24% organic, which is still below the 2019 level for Q1. OE revenue was up 17%. Most of the increase came from custom cabin and galleys for A320. As you will have noticed, business class seat deliveries were down by 82 units, mainly due to continued delays in certification of some programs, but customer demand pushout as well as airlines expect to take deliveries of new airplanes later than expected and some supply chain constraints. Services revenue was up 39%, a strong performance with good customer demand for spare parts in both seats and cabin. Olivier, back to you. Olivier Andries: Thank you, Pascal. To conclude, Q1 revenue and civil aftermarket growth are in line with our full year view. Supply chain production capabilities remain a key watch item. Our LEAP engine deliveries assumption is revised to 10% to 15% growth in 2024 compared to 2023 to reflect a soft start of the year in aircraft production. We reaffirm our financial objectives for 2024 and are confident in our ability to deliver our financial performance for the year. I thank you for your attention, and now Pascal and I will be very pleased to answer your questions. Operator: Thank you. [Operator Instructions] Thank you. We will now take our first question. This is from the line of Ben Heelan from Bank of America. Please go ahead. Ben Heelan: Yeah. Good morning, guys. Thank you again for taking the question. The first one I had was around LEAP in the updated guidance. You've lowered LEAP guide as we heard from GE last week, but aftermarket continues to be very good. So can you talk about your level of confidence around the EUR4 billion? I mean, it feels to me that there could be some upside risk to that. So if there's any color you can give around that would be very helpful. And secondly, we've had obviously production challenges like you mentioned across both OEMs and slow start to the year. Can you talk a little bit about how this is impacting your outlook for CFM aftermarket medium term? I mean, if you look at the data, retirements remain very, very low. The OEs can't deliver what thought that they were going to deliver. So how does that impact your thoughts around that midterm peak of CFM56 aftermarket? And then a third, a follow-up on cabin. It's been highlighted as an area of weakness in the supply chain. So can you just provide a bit of an update on the situation here and what exactly is causing the issues? Thank you. Pascal Bantegnie: Good morning, Ben. This is Pascal. On your first question about any upside we may have on EBIT either coming from less LEAP deliveries or better aftermarket growth. First, on LEAP deliveries, WE are revising downwards our guidance for the year to plus 10% to 15% growth in deliveries. It has several impacts on the P&L. First, it has a negative impact on sales because we'll deliver less engines. It has a slight positive impact on EBIT, because we are selling all these engines at a slight loss. Then it has a strong negative on free cash flow, because we will receive less advanced payments compared to the initial budget we had. And there is a watch item, which remains the inventory level, because we need to make sure that we buy from the supply chain the strict amount of parts we need to build these engines and no more. Otherwise, there is a risk to have over inventory sitting at our place. Now on aftermarket, as I say, this is a strong performance in Q1, above our full year guide of 20%. But this is all driven by LTSA contracts, either for CFM56 or LEAP. And as you know, there is no EBIT impact due to the fact that we are not yet recognizing EBIT on that. And by the way, as I say, this strong performance will reverse as soon as Q2. So by the end of June, I would expect civil aftermarket to be in line with the full year guide namely around 20%. Olivier Andries: Ben, on the midterm side for the CFM56 aftermarket, I have to say that we have already mentioned that, let's say, the lower ramp-up of new generation aircraft deliveries has a positive impact on the aftermarket for CFM56 spares as airlines basically have to fly more intensively with the CFM56 powered aircraft. As a consequence of that, the storage of the CFM fleet continues to decrease. It's down to 7.6% in March 2024, down from 8.1% in December 2023. This is a similar level as in 2019. And in 2019, there was not some -- there were not so many new generation aircraft in the fleet. So it's quite a very strong signal and a positive signal. Same situation on the retirement of CFM56 aircraft. It's a very low level of retirement in Q1. There's only been 36 aircraft being retired, so -- which is a very low level, even lower than before the COVID pandemic. So all that makes us feel good about the midterm CFM56 perspective, especially the peak that we continue to see mid decade, so 2025. But we believe, as we have already highlighted, that basically, it will remain at this level for probably two to three years. So yes, this is a positive. On cabin and seats, yes, we've seen some slippage of business class seats deliveries from Q1 that will slip into Q2 for certification and supply chain issues, because the supply chain issues are still there everywhere. And you have to know that basically the airworthiness authorities, FAA and EASA, in the aftermath of all the events that happened have just tightened quite significantly their request for certification, the requirement -- the level of requirements, especially on the certification test. And that does impact the entire interior industry. It's not only us. It does apply to everybody. So the certification rules have basically been changing and are much more demanding now than they used to be, and this is in the aftermath of what happened. And this is the reason why basically all the players in the aircraft interiors, cabin, seats, all of them are basically struggling a little bit with the timing of the certification test. Hope it's clear. Ben Heelan: Yeah, that's very clear. Thank you. Operator: Thank you. We'll now take our next question. Please stand by. Next question is from the line of George Zhao from Bernstein. Please go ahead. George Zhao: Hi, good morning, everyone. First question on the guidance. I mean, you are producing LEAP deliveries by about 160 deliveries this year, which is not immaterial, but you left the full year revenue guidance unchanged, including for the civil aftermarket. So where is the positive offset coming when you stick to the revenue guide? And second one, this is the first time we're speaking since the Investor Day from GE recently. And we know that your accounting is independent, you wanted to wait until the CMD to share your financial targets. But I was wondering if you could share some early qualitative thoughts as you look at their chart showing that LEAP targets out to 2028. Now what would you say are the biggest source of variation between their and your target? Is it primarily just conservatism on the profit recognition, which is the case through '25 or differences in spares consumption or even MRO? I guess, what are the main buckets of differences? Thanks. Pascal Bantegnie: Good morning, George. First, on your question with respect to LEAP, true, the downward revision is about 150 to 200 engines. Have in mind that it's not only installed engines, but also spare engines. So we expect to deliver less spare engines this year compared to the initial budget. And as you know, with spare engines come with some profit. On the revenue guide, true, this downward revision in LEAP will have a negative impact on revenue. But in the meantime, as you can see, we experienced more revenue coming from services, not only in Propulsion, but also in Equipment and Interiors. So all-in-all, we have not changed our revenue guide. We also had some contingencies included in that guide, which have now disappeared. Keep in mind as well that the dollar is a bit stronger compared to the $1.10 per euro assumption that we have. So it also helps in terms of revenues. On your second question on the profit recognition on LTSA contracts for the LEAP, we won't provide more color than we had in the past. And I won't refer to what GE said at their Capital Market Day. As you know, it will be the bulk of our discussion on December 5th when we held our Capital Market Day. The dynamic is good. We see flying hours going up, meaning more cash today being recognized in our statements, but no impact in terms of either -- well, in terms of profit, as you know. So the profit recognition methodology will be described later this year. George Zhao: All right, thank you. Operator: Thank you. We'll now take our next question. This is from the line of Ian Douglas-Pennant from UBS. Please go ahead. Ian Douglas-Pennant: Thanks very much. Ian Douglas-Pennant at UBS. Could you help me understand a bit better the nature of the LTSA effect in Q1? Just a little bit more detail on exactly what this is, please? And then secondly, I just want to confirm on LEAP. You have indeed cut production capacity versus your initial expectations, and we're not going to see an inventory build, which would impact sales in future periods. So given that engines are a tight point in the supply chain, you're not going to build up some kind of buffer stock in any way. Pascal Bantegnie: Good morning, Ian. On your question for LTSA dynamics in Q1, we have recorded more costs in Q1 that we had expected. As you know, we recognize revenue as we incur costs, so meaning more revenues, and this is why you have a strong aftermarket growth in Q1. But part of the cost we do recognize in Q1 were expected to fall into Q2. So we won't see this cost, meaning revenues in Q2. This is why I'm saying that by the end of June, on the full semester, I would expect civil aftermarket to be more or less in line with the full year 20% guide of 20%. So don't expect this strong Q1 performance to have any impact on the full year guide. Olivier Andries: And Ian, on the second question, it is not our intention to build the buffer of LEAP engines, because this means cash. So yes, indeed, we will re-planify as we say our purchasing of parts, because we are not going to build an engine that the aircraft manufacturers are not going to take. We need to manage our cash and our inventory. Ian Douglas-Pennant: Thanks. On the first question, I guess it's a detailed question. I'll follow up. Thanks so much. Olivier Andries: Thank you. Operator: Thank you. I'll now take our next question. Next question is from the line of Phil Buller from Berenberg. Please go ahead. Phil Buller: Hi, there. Thanks for taking the question. I've got three, if I can, please, sorry. On the growth rate for OE for LEAP this year, obviously, that is quite a big change. Is that exclusively to B? Or is the A contributing in any way to that, please? Olivier Andries: This is primarily B. Phil Buller: Okay. Thank you. And the storage topic was interesting. Obviously, very good from a mix standpoint. But is there a capacity limit approaching in any way? It's clear why we can't really retire any less planes at this point. So from an MRO capacity or a spare part production standpoint, are there any constraints approaching? Olivier Andries: We -- today, our revision, our -- yeah, our view or our outlook for shop visit on the CFM56, as we said in Feb, it's high single digit growth for the full year. And basically, there's the worldwide capacity to make it happen. So the capacity is there. And we don't have much supply chain issues on the CFM56 spare parts. Here and there, we need to focus, but it is not something that we believe will impair our ability to deliver spare parts. Phil Buller: Thank you. And just finally, on the LTSA topic, I appreciate the lack of margin being recognized. But is there anything you're seeing when you're doing the work either positive or negative that may lead to your program margin assumptions changing in any way? Intuitively, it feels like early booking of revenue is possibly not a good thing, but perhaps I'm thinking about that wrong. Thanks. Olivier Andries: It's still early. So we see ups and downs. So that's why we've decided to be cautious. Pascal? Pascal Bantegnie: It's a balance of positive and negative news depending on contracts and where engines operate. So there is no change to our view. But from one contract to the other, we could face additional cost or less cost compared to expectations. But all-in-all, no change in our global view. Phil Buller: Thanks very much. Operator: Thank you. We'll now take our next question. Next question is from the line of Ross Law from Morgan Stanley. Please go ahead. Ross Law: Hi, morning, everyone. Thanks for taking my questions. So first one on Interiors. You mentioned some customer pushouts and supply chain disruption. Are you still comfortable with maintaining at least the kind of breakeven level this year? That's the first one. And then secondly, on aftermarket growth, just a quick one. Of the EUR1.9 billion in sales in Propulsion Services, can you give us an idea of how much was specifically LEAP? Olivier Andries: On interiors, yes, we maintain our target for breakeven this year on Interiors. I confirm, we maintain this objective. Pascal Bantegnie: To be more specific, I would even say, we expect to be slightly profitable in cabin and at breakeven for seats, I guess, is the main point of your question. On aftermarket LEAP, RPFH represents a small portion of our civil aftermarket index. We have not cut any number, I think in the past, so I won't. Maybe to give you more color on the civil aftermarket guidance. As we say, revenues coming from spare parts on these CFM56 or the high thrust engines came in line with expectations. When we guided for 20% growth full year on civil aftermarket, we say during the [indiscernible] call that there should be less growth in spare parts and higher growth than the 20% average on services. Specifically, in Q1 we see the spare parts growth in line with expectations, but on services growth rate was much higher, but for a small portion of the civil aftermarket revenue base. Ross Law: Okay, thank you very much. Operator: Thank you. We'll now take our next question. This is from the line of Robert Stallard from Vertical Research. Please go ahead. Robert Stallard: Thanks so much. Good morning. Olivier Andries: Good morning. Pascal Bantegnie: Good morning. Robert Stallard: First of all, regarding the LEAP. How confident are you with this revised delivery plan, particularly with regard to the 1B? If the 737 issues continue, is there a risk of Boeing essentially destocking you, or bringing down production again? That's my first question. And then secondly, Airbus announced yesterday they're raising the A350 rate to 12 per month later this decade. Would that require any additional CapEx or investment for Safran? Thank you. Pascal Bantegnie: Hello, Robert. On LEAP, the 10% to 15% revised guidance is our best estimate. Now the situation is the one you know. Still a little bit foggy, I would say. So this is our best estimate. We'll see what happens in Q2. And we -- I don't know, we think -- I mean this is our best assumption. We think -- we may -- we'll see what happens in Q2 at B. And from there, we'll see whether we revise or not this guidance for the full year. That's the best I can say. On A350, there is not much CapEx involved to increase to 12 on our equipment. This is mainly landing gear for us, some other wiring and electric equipment. So no, I don't expect there's any big CapEx requirement to do that. The 12 rate was the rate that was originally planned before COVID. Robert Stallard: Thank you very much. Operator: Thank you. We'll now take our next question. This is from the line of Tristan Sanson from BNP Paribas Exane. Please go ahead. Tristan Sanson: Yes. Good morning, gentlemen. Thanks for taking my question. The first one would be maybe on spare engines. Last year, you had a pretty front loaded spare engine activity in Q1. Can you comment on how the business has been behaving this year in Q1? And you said you're expecting a slightly less supportive trend for the full year than initially expected. If you can quantify it, that would be great. Second is on equipment shipments. I'm a bit surprised by the strength of the shipment, for instance, on the A320neo in Q1. We know that in the past you had a slightly differing trajectory compared to airframers, maybe a bit lower at the beginning of last year. Is there some kind of restocking ongoing to support the A320 that is supporting the activity right now? And a final one, I just wondered whether you had any ideas about how to use the production capacity that was freed by the reduction in the LEAP production target for this year whether you could reallocate that to publicly spare engines. That's not the case, but maybe to other engine types or spare parts production or anything else that would be useful. Thank you. Pascal Bantegnie: Morning, Tristan. On spare engines, we expect no impact on the spare engine ratio compared to the installed base. But as we have less installed engines, as I said earlier in the call, there will be less spare engines. But in terms of ratio between the two, it is unchanged. That ratio is reducing over time. It was significantly higher than the average of the 7%, 8% that we usually quote on a program like CFM56 or what we expect on the LEAP. So you should expect this ratio to gradually reduce over time. And again, in '24, same as in '23, I would expect the shipments of spare engines to be frontend loaded in H1 compared to H2. Olivier Andries: Tristan, on the equipment shipment, you can see page 14, especially on the A320neo. There is a significant increase on landing gear sets. There's almost no increase on nacelle. And at the end of the day, this is for the same aircraft. So it's just a question of buffer at the airframer. So basically this means that they had a buffer on nacelle, and they wanted to basically to increase their buffer on landing gear. That's basically -- it reflects -- our deliveries do reflect the demand of the airframer. Pascal Bantegnie: And there was a third question about shall we build -- if I understood well, more spare engines or move from 1B to 1A. Olivier Andries: 1B to 1A we have already discussed the fact that there is almost no commonality between both engines. Even if the supply chain is partially the same. So what I can only say is it will give us, yeah, as a consequence, some airframe and basically facilitate, I would say our adherence to the airframe of demand and to the airline's demand. Tristan Sanson: I didn't specifically mention the 1A or it's from 1B to 1A, but I mentioned the possibility to increase spare parts production, which I think in the past is sometimes something you used to -- use some free capacity available. Is this something you're considering today, increasing the production of spare parts as well? Olivier Andries: I mean, we have not been -- let's say, we have not struggled on spare parts. I mean, the supply chain issues have not been so far a big issue for spare parts deliveries. So no, there is no direct link between LEAP production and CFM56 spare parts production. No, we have not been limited on our ability to produce spare parts that are needed by the market. Tristan Sanson: That's really helpful. Thank you so much to both of you. Operator: Thank you. We'll now take our next question. Please stand by. Next question is from Chloe Lemaire from Jefferies. Please go ahead. Chloe Lemaire: Yes, good morning. I have a follow-up on the LEAP, please. I was wondering if you could confirm at which rate you're delivering to Boeing at the moment. Is it tracking in line with their own production or are you closer to the 38 that they intend to ramp up rather soon? And how should we think about the evolution of LEAP deliveries as you -- as they go back to that rate? Second question is on Interiors. The two products for which you disclosed, deliveries were down 25% lavatory and business class seats. So are economy seats and other OE products up strongly, or is it a matter of pricing for OE sales to still be up in the division? Thank you. Olivier Andries: Hello, Chloe. Rate of delivery of LEAP-1B to Boeing, we have basically continued in Q1 to deliver as per their initial request. So basically the buffer of engines that are at Boeing -- of LEAP engine at Boeing has increased since the start of the year. And obviously, we'll take that into account for the adjustment of the deliveries going forward. On Interiors, no, economy seats are moving up. Deliveries of economy seats are moving up. I don't have the indicator here. We've not mentioned it, but it's up. It's up. Pascal Bantegnie: But Chloe, as we say, pricing plays a positive role in revenue there. Chloe Lemaire: Okay. Thank you. Olivier Andries: And the aftermarket is moving up as well on cabin interiors, cabin and seats. It's moving up. We'll take maybe a couple of questions, if any. Operator: Thank you. Yes, we have two more. Next question is from the line of Christophe Menard from Deutsche Bank. Please go ahead. Christophe Menard: Yes, good morning. Thank you for taking my question. I had two last one remaining questions. The first one is on the defense sales within Equipment & Defense. Correct me if I'm wrong, but it's probably the first time that you highlight such a high growth. So the question is, what was the level of organic growth? And how sustainable is it across quarters for that? And the second is linked to your M&A. You mentioned Air Liquide aeronautical oxygen systems. Can you remind us of your M&A priorities? I mean, you've been in the press for artificial intelligence unit in France. So what are the priorities, bolt-on and technology-wise? Thank you. Olivier Andries: Hello, Christophe. On defense, yes, we are planning for a strong growth on our defense electronics and equipment business for the full year. And we believe it's going to be sustainable. We are mainly involved in optronics. So optronics for UAVs, for helicopters, for combat vehicles, for ships and vessel and submarines. So the demand is quite dynamic there. And we are also involved in navigation, inertial navigation as well as we have guided bomb named AASM, which is a guided bomb for which the demand is strong as well. So yes, I would say this is mainly organic. The growth is mainly organic and this is sustainable we believe. On M&A, our priorities are still the same, no change, bolt-on acquisition. And on defense, this is an area where we are looking at for bolt-on acquisition if it makes sense, on technology-wise, economically-wise to reinforce our portfolio of activities. But it has always to have a connection with what we do today. So yes, still bolt-on acquisition. And artificial intelligence, this is an area that we look at. Christophe Menard: Okay. And just -- thank you very much for that color. On the defense organic sales growth in Q1 and the rest of the year, are we talking 20% or 15%? Or can you give some sort of an area of -- or ballpark estimates of the organic growth we're looking at? Pascal Bantegnie: The sales in Q1, Equipment & Defense was up 22.7% organic. Defense was in the same vein. Christophe Menard: Okay. Thank you very much. Operator: Thank you. Olivier Andries: The last question? Operator: Yes, we have one more question. Please stand by. And the last question is from Olivier Brochet from Redburn Atlantic. Please go ahead. Olivier Brochet: Yes. Good morning, Olivier. Good morning, Pascal. Thank you very much for squeezing me in. I will have three very quick ones. The first one on the LEAP LTSA. Is there anything in what you've seen in the first quarter that makes you confident that this is not going to happen again in Q2 or in Q3, this, I would say, higher cost that you've seen? Second one on the widebody growth in commercial aftermarket, how does it compare with the average of the 27%? And last one on the 787, Boeing mentioned that it was producing at a lower rate than the five that they were targeting, around three probably. Does it impact growth in Q2, Q3 for you? Thank you. Pascal Bantegnie: Good morning, Olivier. Again, on the LTSA, this is purely a phasing effect between Q1 and Q2. Again, we were expecting some costs in Q1, Q2, Q3, Q4. Some costs that were due to fall in Q2, did fall in Q1. Hence, the boost in revenue that we see. But once again, it will reverse, fully reverse in Q2. On the spare part sales for widebody, I would say again, it's in line with expectation. Remember that back in 2023, we did experience lower growth in widebody engines spare parts compared to the CFM56. This year in '24, we would expect CFM56 spare parts growth to be lower than what we should experience in widebody engines, because there is some kind of a catch-up, which is expected this year. And what we see in Q1 is that widebody spare parts growth is higher than CFM56. Olivier Andries: On 787, well, we are on board this aircraft through landing gear, through wiring. And also on cabin interiors, many seats -- some seats. So yes, we may be impacted if Boeing does lower their production plan on 787. But it will not change significantly our equipment top line globally. Olivier Brochet: Thank you very much. Pascal Bantegnie: Thank you, Olivier. Olivier Andries: Thank you. Pascal Bantegnie: Talk to you soon. Olivier Andries: Thank you. End of Q&A: Operator: Thank you. This concludes today's conference call. Thank you for participating and you may now disconnect.