Safran confirms that it is discussing the acquisition of certain flight control activities from Raytheon – 06/05/2023 at 18:23


(AOF) – Following information published in the press, Safran has confirmed that it is in discussions for the potential acquisition of certain flight control and actuation activities (ATA 27) from Raytheon Technologies, within the framework of a competitive process. “At this stage, it is not possible to assess the possibility of the outcome of these discussions or to specify the terms of a possible agreement,” said the aeronautical equipment manufacturer.

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Key points

– Third aerospace supplier: world number 1 in civil aircraft engines, turbines and helicopter flight controls, power transmissions, aircraft engine nacelles, number 2 in space engines and number 4 in military engines… ;

– Activity of €15.3 billion, organized into 3 divisions: aeronautical and space propulsion (48%), equipment & defense (41%) then Aircraft interiors;

– Business model in 4 pillars: refocusing on civil aviation with the acquisition of Zodiac Aerospace, strengthening of propulsion and equipment, with the objective of becoming the world’s number 1 aeronautical equipment manufacturer by 2035, historic partnership with GM, until 2040 on the civilian CFM56 engine, gradually replaced by the Leap engine and ramp-up of services (57% of sales), better margins than original equipment;

– Non-operable capital (11.2% of shares for the State and 6.8% for employees), Ross McInnes chairing the 16-member board of directors, Olivier Andries being managing director;

– Non-debted balance sheet with free cash flow of €2.7 billion and cash of €6.7 billion.

Challenges

– 2025 strategy to increase competitiveness, with annual growth of 10% in turnover and an operating margin between 16 and 18%;

– Innovation strategy supported by R&D of €1.5 billion and financially supported by the French State, with a portfolio of + 13,000 patents (540 applications in 2021, 1st patent applicant in France):

– 2 “Safran Tech” R&T centers in Saclay and Gennevilliers: energy and propulsion, materials and processes, sensors, electrical and electronic systems, signal and information processing, modeling & simulation and future turbine blades,

– platforms with specific equipment for new generation materials,

– consolidation of additive manufacturing processes in Haillan, with a view to their industrial deployment,

– strategic partnerships – the European “Clean Sky”, Saclay, INSALyon, ASTech…:

– Environmental strategy validated by the SBTi:

– reduction in 2030 of 50.4% vs 2018, of C02 emissions from production via an energy sobriety plan of 10% less electricity consumption in 2024,

– 42.5% reduction in CO2 emissions from the 400 main suppliers by 2035, breakthrough “low carbon” aircraft by 2035, integration of sustainable fuels,

– CFM RISE program to reduce engine emissions by +20%;

– Rotation of the portfolio with 3 disposals and 5 acquisitions – Oralia, 63% of Celas, Aubert Duval-, aeronautical electrical systems activity of Thales and Syrlinks;

– Order book at 4 times annual sales (10,000 LEAP engines), recurring after-sales revenue for propulsion and enhanced visibility by Air India orders.

Challenges

– 2022 accounts marked by impairments on Russian activities and Aircaft Interiors;

– Continued improvement of air traffic and CFM engine flight cycles;

– Acceleration of the recovery of Aircraft Interiors (revenues at 60% of 2019 levels);

– After a 25% increase in sales, 2023 objectives of revenue of €23 billion, operating profit of €3 billion and free cash flow of +€2.5 billion.

– 2022 dividend of €1.35, i.e. a payout rate of 40%.

The end of a duopoly?

For several decades, the American Boeing and the European Airbus have shared 99% of the world market for airliners with more than 110 seats. This market weighs more than 100 billion dollars per year. However, this duopoly seems to be weakened in 2022 for several reasons. First, for the first time, two medium-haul single-aisle aircraft, the Chinese Comac’s C919 and the Russian Irkut’s MC-21, are about to enter service. Added to this is the Boeing 737 MAX crisis. With the cessation of deliveries of this aircraft between 2019 and 2021, the production balance has been broken. In 2021 Boeing posted 340 deliveries, with Airbus remaining well ahead with 611.



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