Safran has reported a 32% rise in revenue for 2018 to €21.050bn (which includes a contribution of €3.799bn from Zodiac Aerospace), revenue is 10.4% on an organic basis. Recurring operating income at €3.023bn (including a contribution of €290 million from Zodiac Aerospace), up 37.9% on a reported basis and up 24.7% excluding Zodiac Aerospace. Profit from operations was €2.165bn. Net debt position was €3.269bn as of December 31, 2018.
Strong margin improvements were reported in Propulsion (from 16.2% to 18.5%), Aircraft Equipment (from 11.8% to 14.3%) and Defence (from 7.1% to 8.5%). Civil aftermarket revenue was up 12.2% in driven by spare parts sales for second generation CFM56 engines.
CEO Philippe Petitcolin commented: “Safran exceeded its financial targets in 2018, thanks to an excellent organic momentum across all its businesses and to strong operational execution, particularly in the context of the CFM56-LEAP transition. In 2018, Safran also expanded its leading Aerospace positions with the successful acquisition of Zodiac Aerospace. The Group has been committing all the required resources and talents to integrate quickly and smoothly Zodiac Aerospace’s businesses and people.”
During the year, Safran reported that the CFM56-LEAP transition is “proceeding” with combined deliveries of CFM engines (LEAP and CFM56) up by 13.6% to 2,162 units in FY 2018 from 1,903 units in FY 2017, “reflecting rising assembly rates at airframers and high demand for CFM products”.
The LEAP recorded 3,211 orders and commitments in 2018, bringing the total backlog at 15,620 engines at December 31, 2018.
Safran confirmed that it is continuing to ramp up production ramp up of the LEAP: 1,118 LEAP engines were delivered in 2018 compared with 459 units in the year ago period. CFM International is on track to deliver more than 1,800 LEAP in 2019.
CFM56 deliveries remained at a high level, reaching 1,044 units in 2018 compared with 1,444 in FY 2017.
Safran signed carbon brakes contracts with airlines for a total of more than 1,000 aircraft in 2018, bringing the total installed base close to 9,700 aircraft at end 2018. Safran is the world leader in carbon brakes for commercial aircraft above 100 passengers.
Throughout the year, Safran increased its deliveries of emergency slides for the A320neo, the 737 MAX and the 787. Safran also shipped the first evacuation slides system for the 777X.
Safran also supported the production ramp up for electrical & cockpit systems et water & waste systems for the A220, the A350 and the 787 programs.
For the aircraft seats unit, in 2018, operational performance improved mainly in the production facilities in France (business class and economy seats) and the US (on-time delivery for both long range and single aisle products). The management says that its top priority here is to “address the remaining challenges and restore the trust of costumers”.
Safran added that the integration of Zodiac Aerospace is “delivering organisational, functional and operational progress in line with the roadmap”, adding that it “achieved the planned amount of synergies, and the acquisition of Zodiac Aerospace improved Safran earnings per share above +5% as per the indication provided at H1 2018 earnings release”.
Safran states that it is on track to meet the 2022 targeted synergies. Next steps include the optimization of the industrial footprint and the deployment of Shared Service Centers projects, the optimisation of the integration of Aerosystems and Aircraft Interiors activities into Safran portfolio, the realization of new R&T synergies, as well as the realisation of further synergies to target now €250M in 2022.
On June 21, 2018, Safran successfully issued bonds convertible into or exchangeable for new and/or existing shares (OCEANE) with a zero coupon for a total of €700 million. The bonds were issued at a price of 100% of par corresponding to an annual gross yield to maturity of 0.0%. The nominal unit value of the Bonds was set at €140.10, representing a premium of 37.5% above the reference share value.
At its Capital Markets Day on November 29, 2018, Safran announced its intention to repurchase shares for a total €700 million to avoid the potential dilution from these convertible bonds, on top of the outstanding share buyback program of €2.3 billion.
On July 5, 2018, Safran completed an offering of two-year floating rate notes of €500 million. It was issued at 100% of nominal value and bears a coupon of 3-month Euribor + 33 basis points per annum (coupon floored at 0%).
