Safran reported a revenue of €10,945 million with a free cash flow of €1,463 million and recurring operating income €1,397 million as per the adjusted data in the first half (H1) of 2023. The revenue increased by 27.9% compared to H1 2022.
On an organic basis, H1 2023 revenue increased by 25.9%
Safran reported a steady increase in the global narrowbody capacity at 102% on average of 2019 with Q2 2023 at 104% of Q2 2019.
Commenting on the results, Olivier Andriès, chief executive, Safran said: “Since the start of this year, many new orders have been announced and narrowbody air traffic is now trending above its 2019 level, fueling a strong demand for spare parts and aftermarket services. In this dynamic commercial environment, Safran is fully focused on the production ramp up. We are on track to meet our delivery commitments despite continuing industry-wide supply chain challenges. In the light of a strong performance in H1, we are raising our profit and cash guidance for the year.”
Safran’s propulsion increased by 34.1% supported by a solid civil aftermarket activity driven by strong spare parts sales for CFM56 as well as service activities. LEAP deliveries reached 785 units representing a 69% annual growth while the aircraft interiors revenue recorded a 33.8% growth primarily driven by services for all activities. Safran’s total R&D, including R&D sold to customers, reached €862 million, compared with €719 million in H1 2022.
Self-funded R&D expenses before tax credits were up 24% at €575 million in H1 2023 including, development expenses at €313 million. The figure was €259 million in H1 2022.
The impact on recurring operating income of expensed R&D was €473 million, up 0.1 point of sales compared to H1 2022, with both higher capitalized R&D and amortization related to R&D programs. It represents 4.3% of sales, a consistent level with a mid-term target of 4.5% on average for 2021-2025.
Safran’s H1 2023 recurring operating income reached €1,397 million, +33.4% compared to H1 2022 with the propulsion recurring operating margin up by 1.2pt as against aircraft interiors which posted a recurring operating loss of €100 million, including €33 million depreciation of operating assets (obsolete inventory and development costs on two programs) for Seats
The adjusted net income was €1,043 million in H1 2023 as compared to €536 million in H1 2022. It includes net financial income of €63 million, including reduction of cost of debt at €42 million (returns on cash investments exceed cost of debt) and €21 million exchange revaluation of positions in the balance sheet and tax expense of €318 million.
Safran reported a free cash flow of €1,463 million from significant advance payments, notably from Rafale export customers. Safran continued to increase its investments in production capacity and low carbon initiatives with capital expenditures up to €448 million in H1 2022
Andriès added: “In line with its strategy, Safran demonstrates its ability to shape its portfolio of activities through targeted acquisitions, while investing in organic growth and ensuring an attractive return to shareholders.”
As of June 30, 2023, Safran’s balance sheet exhibited a €263 million net debt position as against net cash of €14 million as at December 31, 2022, including the dividend payment €564 million to shareholders of the parent company and the share repurchase program €947 million. Cash and cash equivalent stood at €6,147 million, down from €6,687 million at the end of December 2022.
In March 2023 Safran reimbursed at maturity a €180 million 7-year Euro private placement loan format.
As of May 24, 2023, Safran completed the purchase of 9.4 million shares announced on October 28, 2022 in order to hedge the potential dilution of 2027 convertible bonds.
Safran launches a liability management transaction aimed at eliminating the dilution risk related to the 2028 convertible bonds. Safran will thus repurchase up to approximately 4.0 million of its own shares, representing approximately 0.95% of capital. The 2028 OCEANEs have a nominal value of €180.89.
Safran launches a share repurchase program for the purpose of subsequent share cancellation. This program of up to €1 billion is due to be completed by end 2025.
Safran has raised its full-year outlook based on strong demand, Safran expects a revenue of at least €23.0 billion with a recurring operating income of €3.1 billion with a free Cash Flow of at least €2.7 billion.