Safran : Half-year 2020 earnings

FIRST-HALF 2020 EARNINGS

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Disclaimer

• FORWARD-LOOKINGSTATEMENTS
  This document contains forward-looking statements relating to Safran, which do not refer to historical facts but refer to expectations based on management's current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance, or events to differ materially from those included in such statements. These statements or disclosures may discuss goals, intentions and expectations as to future trends, synergies, value accretions, plans, events, results of operations or financial condition, or state other information relating to Safran, based on current beliefs of management as well as assumptions made by, and information currently available to, management. Forward-looking statements generally will be accompanied by words such as "anticipate," "believe," "plan," "could," "would," "estimate," "expect," "forecast," "guidance," "intend," "may," "possible," "potential," "predict," "project" or other similar words, phrases or expressions. Many of these risks and uncertainties relate to factors that are beyond Safran's control. Therefore, investors and shareholders should not place undue reliance on such statements. Factors that could cause actual results to differ materially from those in the forward-looking statements include, but are not limited to: uncertainties related in particular to the economic, financial, competitive, tax or regulatory environment; the risks that the new businesses will not be integrated successfully or that the combined company will not realize estimated cost savings and synergies; Safran's ability to successfully implement and complete its plans and strategies and to meet its targets; the benefits from Safran's plans and strategies being less than anticipated; the risks described in the Universal Registration Document (URD); the full impact of the outbreak of the COVID-19 disease.
  The foregoing list of factors is not exhaustive. Forward-looking statements speak only as of the date they are made. Safran does not assume any obligation to update any public information or forward-looking statement in this document to reflect events or circumstances after the date of this document, except as may be required by applicable laws.
• USE OF NON-GAAP FINANCIAL INFORMATION
  This document contains supplemental non-GAAP financial information. Readers are cautioned that these measures are unaudited and not directly reflected in the Group's financial statements as prepared under International Financial Reporting Standards and should not be considered as a substitute for GAAP financial measures. In addition, such non-GAAP financial measures may not be comparable to similarly titled information from other companies.
• DEFINITION
  Civil aftermarket (expressed in USD): This non-accounting indicator (non-audited) comprises spares and MRO (Maintenance, Repair & Overhaul) revenue for all civil aircraft engines for Safran Aircraft Engines and its subsidiaries and reflects the Group's performance in civil aircraft engines aftermarket compared to the market.

• Safran / H1 2020 earnings / July 30, 2020

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Agenda

1. H1 2020 highlights
2. Update on Covid-19 impacts
3. H1 2020 results
4. 2020 outlook
5. Q&A
6. Safran and the challenges of climate change
7. Additional information

• Safran / H1 2020 earnings / July 30, 2020

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1

H1 2020 HIGHLIGHTS

Philippe PETITCOLIN - CEO

• Safran / H1 2020 earnings / July 30, 2020

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H1 2020 Overview

Activity

• Safran activities held up well in Q1 2020 but strongly impacted by Covid-19 crisis in Q2 2020 in terms of activity and profitability
• Alignment with significant OE production rate cuts announced by airframers
• Airlines in cash preservation mode impacting services (in particular civil aftermarket) and aircraft interiors activities; deferrals and cancellations requested by airlines
• Adaptation plan starting to materialize in H1 2020, to continue in H2 2020; industrial footprint adaptation, workforce resizing and Group "Activity Transformation" agreement signed in France to deal with the consequences of the Covid-19 crisis

Finance

• EBIT margin maintained at above 10% in spite of a strong decrease of revenues, thanks to the implementation of the adaptation plan (R&D expenses, furlough schemes impact,…)
• Positive FCF generation deleveraging the balance sheet and strong liquidity

• Safran / H1 2020 earnings / July 30, 2020

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H1 2020 financial highlights

Adjusted revenue(1)

Adjusted recurring operating income(1)

Free cash flow generation

12,102

(27.6)%

8,767

(29.0)%

org

(€M)

1,883

(49.7)%

947

(54.4)%

org

(€M)

1,177

(23.4)%

(€M)

901

H1 19

H1 20

H1 19

H1 20

H1 19

H1 20

Adjusted net profit(1) (group share)

1,353

(63.0)%

501

(€M)

H1 19

H1 20

Basic earnings per share (group share)

3.13

(62.3)%

1.18

(€)

H1 19

H1 20

Net debt position

(€M)

(3,082)

(4,114)

12/31/201906/30/2020

• Safran / H1 2020 earnings / July 30, 2020

(1) See slide 20 for bridge with consolidated figures

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H1 2020 business highlights - Propulsion

Combined shipment of CFM56 and LEAP engines reached 534 units in H1 2020 (vs 1,119 units in H1 2019) down 52.3%

LEAP production impacted by airframers production rate cuts:

> 450 LEAP engines delivered in H1 2020 (861 in H1 2019) > 126 orders and commitments logged in H1 2020

> 60% market share on A320neo family at June 30, 2020

CFM56 production ramping down:

> 84 engines delivered in H1 2020 (258 in H1 2019)

Civil aftermarket (in $): (34.4)% in H1 2020, down (3.3)% in Q1 and (66.0)% in Q2 Helicopter business highlights

In the context of a less affected market, Safran won significant support contracts with:	Leap assembly line

• the NATO Helicopter Management Agency (NAHEMA) to support 276 NH90 engines
• the Royal Netherlands Air Force (RNLAF) to support over 40 Makila engines until their end-of- life.

• Safran / H1 2020 earnings / July 30, 2020

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H1 2020 business highlights - Aircraft Equipment, Defense and Aerosystems

Division affected by Covid-19 crisis, but Defense activity less impacted

• Electronics & Defense : Safran's new EuroflirTM 410 optronic (electro-optical) observation system has been selected by Héli-Union for the French navy's Dauphin N3 helicopters.
• Carbon brakes : Safran signed a contract with an Asian airline to provide carbon brakes for 10 Boeing 787

A330neo's air inlet assembly

• Safran / H1 2020 earnings / July 30, 2020

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H1 2020 business highlights - Aircraft Interiors

Despite the strong impact of the Covid-19 crisis (widebody aircraft exposure, discretionary sales), contracts were awarded

Cabin

• Two Asian airlines choose Safran's trolleys, one to equip its A320 fleet and the other its Boeing 787-10 fleet

Seats

• A European airline to provide premium economy and economy class seats for its new A350

Passenger Solutions

• Safran was selected for multiple A350 IFE line fit contracts and a follow-on Boeing 777 IFE retrofit contract
• Two railway contracts for Water & Waste Systems with deliveries starting at the end 2020 and 2021

• Safran / H1 2020 earnings / July 30, 2020

Z400 economy class seats

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2

UPDATE ON COVID-19

IMPACTS

Philippe PETITCOLIN - CEO

10 Safran / H1 2020 earnings / July 30, 2020

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Covid-19: update on air traffic

IATA estimates (as of July 28, 2020):

• June air traffic remains very weak compared to the previous year
• • RPK down by (86.5)% in June against (91.3)% in May; ASK down by (80.1)% in June against (86.0)% in May
• RPK will not return to pre Covid-19 levels until 2024, a year later than previously estimated
• • The recovery in short haul travel is still expected to happen faster than for long haul travel
• Traffic for 2021 will be down (36)% compared to 2019, after an increase of 75% between 2020 and 2021

⇒RPK for 2020 downgraded to (63)% compared to 2019 (versus (54.7)% forecasted at the beginning of June)

CFM56 and LEAP flight cycles are improving, driven by China, North America and Europe. As of July 28, 2020 :

• Weekly CFM56 fleet cycles are down (51.7)% yoy (vs down (83)% at trough in April)
• Weekly LEAP fleet cycles are down (23)% yoy (vs down (76)% at trough in April)

Continuing public support for airlines by many governments around the world

11 Safran / H1 2020 earnings / July 30, 2020

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Covid-19: update on industrial operations

Implementation of health and safety guidelines on all the sites of the Group consistent with local regulations

Supply chain is under scrutiny: task force in place to identify and support critical suppliers, restructuring announced by some suppliers. Safran will contribute €58M equity support through the dedicated fund announced by the French government in June 2020

The situation is normalizing, as of July 17, 2020 :

• 14 of our ~250 sites closed, compared to 30 as of May 18, 2020
• 50% of workforce on-site, 10% working from home
• 25% at Group level under short-time working or furlough - in average between April and June 2020 : 30% on a worldwide basis, 34% in France (excl. public holidays and days off)

Our main customers vision, as of today, for new aircraft and engines deliveries in 2020 :

• Airbus : Decrease by more than 30% on narrowbodies (A320 family) Decrease by around 50% on widebodies
• Boeing : Boeing 737 MAX return to service anticipated in Q4 with very slow production ramp-up

Decrease by around 30% on widebodies (747, 767, 777, 787), military applications and freighters being less impacted

• Airlines and lessors : orders cancellations in H1 2020, significant 2020/2021 deliveries deferrals requests, decline in airlines discretionary spending and pressure on spare engines deliveries

Continuous adjustment to manufacture around 800 LEAP engines in 2020

12 Safran / H1 2020 earnings / July 30, 2020

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Covid-19: adaptation plan - H1 2020 achievements (1/2)

Workforce and industrial footprint adaptation already implemented, started to materialize in H1 2020

• Resizing the workforce to the needs of the business
• • Reduction of permanent workers by (12)%, (14)% including temporary workers, on a worldwide basis as of July 17, 2020 (mainly in the US, Mexico, Thailand, Tunisia and Morocco)
  • In France, a Group "Activity Transformation" agreement reached in July 2020 with all unions, valid until end of 2021 and renewable, will allow Safran to navigate the next 12 to 18 months of the crisis while preserving skills and enhancing competitiveness in French activities.
  • • Deployment of the long-termshort-time working
    • Wage moderation for employees
    • Cap of profit sharing and savings schemes
    • Early retirement incentives (3,000 departures targeted)

• ⇒Positive financial impacts of this agreement will start to materialize from H2 2020

• Industrial footprint rationalization
• • 4 sites closure on going in Seats (UK, US), Cabin (US) and Electrical & Power (US) activities
  • 3 transfers of production notably in Cabin and Electrical & Power activities
  • ~10 restructuring plans
• €(77)M restructuring costs already booked in H1 2020

13 Safran / H1 2020 earnings / July 30, 2020

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Covid-19: adaptation plan - H1 2020 achievements (2/2)

H1 2020 adaptation plan achievements consistent with year-end objectives

• Scaling purchasing programs in line with the drop in activity in H1 2020
• • Decrease by more than (30)% of raw materials and supplies expenses
  • Decrease by more than (40)% of sub-contracting expenses

⇒Work-in-progress and inventories are stabilizing

Capex commitments reduced by (74)% in H1 2020, above the initial objective of a reduction of (60)% in 2020

R&D expenses reduced by (31)% in H1 2020, in line with the objective of a reduction by (30)% in 2020 compared to 2019

• Operating expenses(1) reduced by (17)% in H1 2020, consistent with the target of a reduction by more than (20)% at year-end compared to 2019

1. Excluding purchasing and including R&D expenses

14 Safran / H1 2020 earnings / July 30, 2020

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Key takeaways: quick and proactive approach to adapt Safran

Strong pressure in Q2, notably in civil aftermarket. A lot of uncertainties remain

Safran is significantly reducing its costs and lowering its breakeven point to benefit from the recovery when it occurs

• First impacts from the adaptation plan already in H1 2020 : workforce resizing, furlough schemes, industrial footprint adaptation, reduction of operating expenses (including R&D expenses), reduction of Capex commitments

A significant Group "Activity Transformation" agreement reached with all unions in France that will impact positively from H2 2020

As of today, a gradual recovery is the central scenario with air traffic expected to go back to 2019 levels by 2023-2024

• New aircraft deliveries are expected to be lower for a period of time, exceeding 2020
• Services (notably civil aftermarket) and aircraft interiors activities strongly affected in 2020

Prospects remain good for Safran, notably thanks to its exposure to:

• Civil aftermarket, expected to recover faster than OE and CFM56 fleet remains a key asset
• Narrowbody, short haul routes being less impacted than international routes

Safran reinforce its commitment and actions to address the climate change challenge. Government support will allow Safran to maintain a high level of R&T activity in the next years, offsetting most of the decrease in its self-funded expenses over next years due to the crisis.

15 Safran / H1 2020 earnings / July 30, 2020

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3

H1 2020 RESULTS

Bernard DELPIT - Group CFO

16 Safran / H1 2020 earnings / July 30, 2020

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Foreword

Adjusted data

All revenue figures in this presentation represent adjusted data(1) (except where noted). Safran's consolidated income statement has been adjusted for the impact of:

• purchase price allocations with respect to business combinations. Since 2005, this restatement concerns the amortization charged against intangible assets relating to aircraft programs revalued at the time of the Sagem-Snecma merger. With effect from the first half 2010 interim financial statements, the Group decided to restate:
• • the impact of purchase price allocations for business combinations, particularly amortization and depreciation charged against intangible assets and property, plant and equipment recognized or remeasured at the time of the transaction and amortized or depreciated over extended periods due to the length of the Group's business cycles and the impact of remeasuring inventories, as well as
  • gains on remeasuring any previously held equity interests in the event of step acquisitions or asset contributions to joint ventures;
• the mark-to-market of foreign currency derivatives, in order to better reflect the economic substance of the Group's overall foreign currency risk hedging strategy:
• • revenue net of purchases denominated in foreign currencies is measured using the effective hedged rate, i.e., including the costs of the hedging strategy
  • all mark-to-market changes on instruments hedging future cash flows are neutralized
• The resulting changes in deferred tax have also been adjusted.

17 Safran / H1 2020 earnings / July 30, 2020

Organic growth

Organic variations were determined by excluding the effect of changes in scope of consolidation and the impact of foreign currency variations.

Recurring operating income

Operating income before capital gains or losses on disposals /impact of changes of control, impairment charges, transaction and integration costs.

1. See slide 20 for bridge with consolidated and adjusted income statements

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FX (1/2)

Translation effect: foreign currencies translated into €

• Positive impact mainly from USD
• Impact on Revenues and Return on Sales

Transaction effect: mismatch between $ sales and € costs is hedged

Mark-to-Market effect

• €1,001M loss on fair value of financial instruments in consolidated accounts

18 Safran / H1 2020 earnings / July 30, 2020

Average spot rate

H1 2019	H1 2020
$1.13	$1.10

Hedge rate

H1 2019	H1 2020
$1.18	$1.16

Spot rate at close

06/30/2019 12/31/2019 06/30/2020

$1.14 $1.12 $1.12

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FX (2/2) - $21.6bn hedge book* (July 28, 2020)

Average annual exposure revised downwards to $8bn in 2020,

growing by $1bn per year thereafter

(in $Bn)

11.0
	8.0	9.0
			5.4
				3.2
2019	2020e	2021e	2022e	2023e

€/$ hedge	1.18	1.16	1.14-1.16	1.12-1.14	To be updated
rate target

• Approx. 45% of Safran US$ revenue are naturally hedged by US$ procurement

19 Safran / H1 2020 earnings / July 30, 2020

• A weakening USD triggered some Knock-Out barriers of Fx derivatives for 2022 and 2023. The hedge book has therefore decreased to $21.6bn as of July 28, 2020
• The hedge book includes barrier options with Knock-Out triggers ranging from $1.18 to $1.26 with maturities up to end- 2021, representing a risk to the size of the book and to targeted hedge rates in case of brutal exchange rate fluctuations

2020

• Firm coverage of $8.0bn achieved through forward sales and knock-out options at a target rate of $1.16

2021

• Firm coverage of $9.0bn achieved through knock-out options at a target rate between $1.14 and $1.16

2022

• Firm coverage of $5.4bn achieved through knock out options; target rate between $1.12 and $1.14

2023

• Firm coverage of $3.2bn achieved through knock out options; target rate to be updated

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Consolidated and adjusted income statements

		Currency hedging	Business combinations
H1 2020 reconciliation (In €M)		Re-measurement of	Deferred hedging	Amortization	PPA impacts - other	Adjusted
Consolidated data	business
of intangible assets -	data
		revenue	gain / loss	Sagem/Snecma merger	combinations
		(1)	(2)
		(3)	(4)
Revenue	8,902	(135)				8,767
Other operating income and expenses	(8,072)	6	2	24	172	(7,868)
Share in profit from joint ventures	29				19	48
Recurring operating income	859	(129)	2	24	191	947
Other non-recurring operating income and expenses	(144)					(144)
Profit (loss) from operations	715	(129)	2	24	191	803
Cost of debt	(20)					(20)
Foreign exchange gain / loss	(1,181)	129	1,001			(51)
Other financial income and expense	(46)					(46)
Financial income (loss)	(1,247)	129	1,001			(117)
Income tax expense	207		(321)	(8)	(47)	(169)
Profit (loss) from continuing operations	(325)		682	16	144	517
Attributable to non-controlling interests	(15)			(1)		(16)
Attributable to owners of the parent	(340)		682	15	144	501

1. Remeasurement of foreign-currency denominated revenue net of purchases (by currency) at the hedged rate (including premiums on unwound options) through the reclassification of changes in the fair value of instruments hedging cash flows recognized in profit or loss for the period.
2. Changes in the fair value of instruments hedging future cash flows that will be recognized in profit or loss in future periods (a positive €1,001 million excluding tax), and the impact of taking into account hedges when measuring provisions for losses on completion (a positive €2 million at June 30, 2020).
3. Cancellation of amortization/impairment of intangible assets relating to the remeasurement of aircraft programs resulting from the application of IFRS 3 to the Sagem-Snecma merger.
4. Cancellation of the impact of remeasuring assets at the time of the Zodiac Aerospace acquisition for €155 million excluding deferred tax and cancellation of amortization/impairment of assets identified during other business combinations.

20 Safran / H1 2020 earnings / July 30, 2020

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H1 2020 income statement

(In €M)	H1 2019	H1 2020
Revenue	12,102	8,767
Other recurring operating income and expenses	(10,303)	(7,868)
Share in profit from joint ventures	84	48
Recurring operating income	1,883	947
% of revenue	15.6%	10.8%
Total one-off items	32	(144)
Profit from operations	1,915	803
% of revenue	15.8%	9.2%
Net financial income (expense)	(32)	(117)
Income tax expense	(496)	(169)
Profit for the period	1,387	517
Profit for the period attributable to non-controlling interests	(34)	(16)
Profit attributable to owners of the parent	1,353	501
EPS (basic in €)	3.13*	1.18**
EPS (diluted in €)	3.09***	1.14****

21 Safran / H1 2020 earnings / July 30, 2020

Change mainly due to the decrease of share in profit from ArianeGroup

Of which mainly restructuring costs of €(77)M and impairment for two programs

Of which cost of debt of €(20)M and foreign exchange losses of €(51)M

Apparent tax rate of 24.7%

• Based on the weighted average number of shares of 432,218,259 as of June 30, 2019
  ** Based on the weighted average number of shares of 425,155,180 as of June 30, 2020
  *** Based on the weighted average number of shares after dilution of 437,834,002 as of June 30, 2019
  **** Based on the weighted average number of shares after dilution of 437,745,244 as of June 30, 2020

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H1 2020 revenue

(in €M)

			(27.6)%
12,102	(3,509)
		8,593	194	8,787	(20)	8,767
	(29.0)%
H1 2019	Organic	H1 2020 at H1	Currency	H1 2020 at	Changes in	H1 2020
	variation	2019 scope and	impact	H1 2019	scope
		exchange rates		scope
22 Safran / H1 2020 earnings / July 30, 2020

Organic decrease: (29.0)%

• Propulsion: (33.0)%
• • With OE down (40.0)%
  • With services down (27.9)%
• Aircraft Equipment, Defense & Aerosystems: (21.7)%
• Aircraft Interiors: (35.1)%

Currency impact: +1.6%

• Positive translation effect notably USD vs Euro ($1.10 vs $1.13 average spot rate)

Scope: (0.2)%

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H1 2020 recurring operating income

In €M

(49.7)%

Main organic drivers

1,883

(1,025)

Negative

volume

impact

in all

activities

both from :

> OE : NB and WB production rates

cuts, M88 deliveries

> Services

:

mainly

due

to

civil

aftermarket, but also carbon brakes

and

landing

gear

activities

and

858

93

951

(4)

947

Aerosystems

Under absorption of fixed costs

(54.4)%

Positive

contribution of

the adaptation

plan :

> lower R&D impact in P&L

> furlough schemes

> Decrease

of

employee shareholding

H1 2019

Variation

H1 2020 at H1

Currency

H1 2020 at

Changes in

H1 2020

plans

excluding

2019 scope

impact

H1 2019

scope

currency impact

and exchange

scope

and changes in

rates

scope

23 Safran / H1 2020 earnings / July 30, 2020

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Research & Development

(In €M)	H1 2019	H1 2020	Change
Total R&D	(851)	(597)	254
R&D sold to customers	200	150	(50)
R&D expenses	(651)	(447)	204
as a % of revenue	5.4%	5.1%	(0.3)pt
Tax credit	83	74	(9)
R&D expenses after tax credit	(568)	(373)	195
Gross capitalized R&D	152	124	(28)
Amortisation and depreciation of R&D	(144)	(124)	20
P&L R&D in recurring operating income	(560)	(373)	187
as a % of revenue	4.6%	4.3%	(0.3)pt

24 Safran / H1 2020 earnings / July 30, 2020

R&D expenses

• €(447)M in H1 2020
• Decrease of (31.3)% in line with the adaptation plan objectives

Gross capitalized R&D

• €124M in H1 2020, down €(28)M

P&L R&D in recurring operating income

• €(373)M in H1 2020
• R&D in P&L decrease as a % of sales (4.3% in H1 2020 vs. 4.6% in H1 2019)

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H1 2020 results by activity

			Aircraft
(In €M)	H1 2020	Aerospace	Equipment,	Aircraft	Holding
Propulsion	Defense &	Interiors	& others
			Aerosystems
Revenue	8,767	4,047	3,638	1,072	10
Year-over-year growth in %	(27.6)%	(31.4)%	(20.1)%	(34.6)%	na
Year-over-year organic growth in %	(29.0)%	(33.0)%	(21.7)%	(35.1)%	na
Recurring operating	947	699	343	(101)	6
income
as a % of revenue	10.8%	17.3%	9.4%	(9.4)%	na
Recurring operating margin variation	(4.8)pts	(3.5)pts	(3.5)pts	(14.6)pts	na
(vs H1 2019)

25 Safran / H1 2020 earnings / July 30, 2020

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Aerospace Propulsion

(In €M)	H1 2019	H1 2020	Change	Organic
Change
Revenue	5,902	4,047	(31.4)%	(33.0)%
Recurring operating income	1,227	699	(43.0)%
% of revenue	20.8%	17.3%	(3.5)pts
One-off items	-	(20)
Profit (loss) from operations	1,227	679
% of revenue	20.8%	16.8%

Revenue

• OE narrowbody engines volumes impacted by the 737 MAX grounding and airframers production rate cuts: 450 Leap engines delivered (-411 vs. H1 2019). CFM56 ramped down (-174 deliveries vs. H1 2019). Both installed and spares engines deliveries decreased compared to H1 2019. High thrust engines were impacted to a lesser extent during the first half 2020. Helicopter turbines OE sales faced a slight headwind during the first half of the year
• As planned, M88 engines deliveries were slightly down and amounted to 19 units in H1 2020 compared with 22 in H1 2019
• Decrease in services due to civil aftermarket (-34.4% in $), military activities (strong comparison basis) and helicopter turbines support activities

Recurring operating income

• Lower volumes: civil aftermarket and to a lesser extent military activities. Helicopter turbines had a slight positive impact due to one-off effects
• Under absorption of fixed costs
• Positive impact from the implementation of the adaptation plan (lower R&D expenses and furlough schemes)

26 Safran / H1 2020 earnings / July 30, 2020

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Aircraft Equipment, Defense and Aerosystems

(In €M)	H1 2019	H1 2020	Change	Organic
Change
Revenue	4,553	3,638	(20.1)%	(21.7)%
Recurring operating income	588	343	(41.7)%
% of revenue	12.9%	9.4%	(3.5)pts
One-off items	(1)	(73)
Profit (loss) from operations	587	270
% of revenue	12.9%	7.4%

Revenue

• OE (-21.0% org): mainly driven by wiring activities as well as lower volumes of landing gears for Boeing 787, A330, A350 and A320 family and nacelles for A320 family and A330neo. Avionics (FADEC for LEAP) and Aerosystems (evacuation, oxygen and fuel control systems) activities were also impacted by the Covid-19 crisis. Within Defense activities, sighting and navigation systems slightly grew compared to the year ago period
• Services (-23.1% org.): mainly driven by carbon brakes and landing gear activities, by Aerosystems and nacelles support activities (mainly for A320neo)

Recurring operating income

• Lower volumes (OE and services) coming from landing systems activities (notably in services), electrical activities, nacelles, avionics and Aerosystems. This decrease was partially offset by Defense activities
• Positive impact from the implementation of the adaptation plan (lower R&D expenses and furlough schemes)

27 Safran / H1 2020 earnings / July 30, 2020

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Aircraft Interiors

(In €M)	H1 2019	H1 2020	Change	Organic
Change
Revenue	1,640	1,072	(34.6)%	(35.1)%
Recurring operating income	85	(101)	(218.8)%
% of revenue	5.2%	(9.4)%	(14.6)pts
One-off items	(1)	(51)
Profit (loss) from operations	84	(152)
% of revenue	5.1%	(14.2)%

Revenue

• OE (-37.0% org.): sales were strongly impacted in Cabin due to lower volumes for galleys (capacity reduction on Boeing 737 MAX, A320 and A330 programs), for inserts and for lavatories activities (mainly A220 and A350). All class seats programs were impacted by the Covid-19 crisis, as well as Connected Cabin (IFE) and custom cabin interior activities for Passenger Solutions
• Services (-30.2% org.): mainly due to Seats aftermarket as well as Cabin spare sales (galleys, trolleys, inserts) and MRO activities. Passenger Solutions support activities decreased less than other activities

Recurring operating income

• Lower volumes (OE and services)
• Positive impact from the implementation of the adaptation plan (lower R&D expenses and furlough schemes)

28 Safran / H1 2020 earnings / July 30, 2020

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H1 2020 Free Cash Flow

(in €M)	H1 2019	H1 2020
Recurring operating income	1,883	947
One-off items	32	(144)
Amortization, provisions and depreciation (excl. financial)	517	613
EBITDA	2,432	1,416
Income tax and non cash items	162	(262)
Cash from operating activities before change in WC	2,594	1,154
Change in WC	(863)	168
Cash from operating activities after change in WC	1,731	1,322
Capex (tangible assets)	(332)	(273)
Capex (intangible assets)*	(222)	(148)
Free cash flow	1,177	901

* Of which €124M capitalised R&D in H1 2020 vs €152M capitalised in H1 2019

29 Safran / H1 2020 earnings / July 30, 2020

Of which

• Amortization €527M
• Provisions €(47)M
• Depreciation €133M

(42)% decrease in EBITDA, driven by strong organic decrease

Decrease of working capital driven by :

• stable inventories
• limited increase in overdues
• positives one-off items as Safran did not reimburse engines concessions as deliveries of aircraft were delayed

Net Capex spending decrease in line with the adaptation plan objectives

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Strong liquidity

Cash and cash equivalent of €4.373 bn (up €1.741 bn compared with December 31, 2019)

€2.52 billion undrawn revolving credit facility available until December 2022. Primarily a back up to the commercial paper (NEU CP) program under which €1.5 billion was outstanding at June 30, 2020. The maximum amount available under the NEU CP program is €3.0 billion

Additional undrawn €3 billion bridge facility set up on April 22 with a pool of French and international banks with a up to 2-year maturity, at Safran's option. Amount reduced to €1.6 billion after ca. 50% being already refinanced with medium and long term funded debt:

• €800 million seven-year convertible bonds (2027) paying an annual coupon of 0.875%, with a conversion premium of 40% (exercise price of €108.23) issued on May 15
• €564 million senior unsecured notes issued on the US private placement market (USPP) on June 29, of which €282 million have a 10-year maturity (2030) and €282 million have a 12-year maturity (2032). €286 million were directly raised in euros and €278 million were originally funded in US dollars and then swapped in euros with cross currency swaps on July 21. The average interest rate across the various tranches and post cross currency swaps is 2.07%

30 Safran / H1 2020 earnings / July 30, 2020

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A sound balance sheet

Net debt decrease by €1.032 billion over H1 2020

December 31,2019

Cash & equiv.

€2,632M

+

Debt hedging instruments €33M

Gross debt

€6,779M(1)

Net debt €4,114M

(1) Incl. €1.8bn of commercial papers (NEUCPs)

June 30, 2020

	Cash & equiv.
	€4,373M
	+
Gross debt	Debt hedging
instruments €63M
€7,518M(1)
Net Debt
	€3,082M

1. Incl. €1.5bn of commercial papers (NEUCPs) and incremental debt with the 2027 OCEANE and 2030/2032
   USPP

31 Safran / H1 2020 earnings / July 30, 2020

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Net debt

(in €M)
Net debt at	Net debt at
Dec 31, 2019	June 30, 2020

3,044

(4,114)

(3,082)

168

		(421)	131
1,154
		R&D	(401)
Cash flow	Change
and		Others
from ops	in WC
Capex

€901M Free Cash Flow

32 Safran / H1 2020 earnings / July 30, 2020

Net debt decrease by €1,032M over H1 2020 driven by cash flow from operations (€1,154M) mostly in Q1

"Others" include the impact of 2020 employee shareholding plan

No impact on net debt from debt issuance achieved in H1 2020

Reminder : no dividend paid in 2020 for the 2019 financial year

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Balance sheet highlights as of June 30, 2020

(In €M)	Dec 31,	June 30,
2019	2020
Goodwill	5,199	5,197
Tangible & Intangible assets and right of use	14,609	14,147
Investments in joint ventures and associates	2,211	2,199
Other non current assets	684	1,002
Operating Working Capital	(1,131)	(1,534)
Net cash (debt)	(4,114)	(3,082)
Shareholders' equity - Group share	12,371	12,157
Minority interests	377	390
Non current liabilities (excl. net cash (debt))	1,852	1,748
Provisions	3,083	3,037
Other current liabilities / (assets) net	(225)	597

33 Safran / H1 2020 earnings / July 30, 2020

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4

2020 OUTLOOK

Philippe PETITCOLIN - CEO

34 Safran / H1 2020 earnings / July 30, 2020

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New FY 2020 outlook

Based on a strong FY 2019 year comparison basis, Safran, despite considerable uncertainty and based on the assumption of a gradual recovery of air traffic, now expects for FY2020:

Adjusted revenue to decrease by approximately (35)% at an estimated average spot rate of USD

1.10 to the Euro. Similar variation in organic terms;

Recurring operating margin around 10% of sales based on a hedged rate of USD 1.16 to the Euro;

Positive free cash flow generation in H2, despite strong uncertainties regarding working capital evolution.

35 Safran / H1 2020 earnings / July 30, 2020

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FY 2020 key assumptions

This outlook is notably based on the following assumptions:

• Propulsion:
• • In a context of an overall decrease in deliveries of new aircraft and on the basis of a return to service of the 737 MAX in Q4 as announced by Boeing, Safran now estimates that the number of deliveries of LEAP engines should be around 800 in 2020. Deliveries decrease of military engines compared to 2019 is unchanged from forecasts at the start of the year;
  • Decrease in civil aftermarket estimated at around (50)% for FY2020.
• Aircraft Equipment, Defense and Aerosystems:
• • Based on lower quantities announced by airframers to be delivered in H2 on the main widebody programs, organic decrease in sales is expected to be greater in H2 than in H1;
  • Recurring operating margin in H2 improving compared to H1 due to adaptation plan ramp-up.
• Aircraft Interiors:
• • Assuming a very low level of retrofit activities for airlines in H2, organic decrease in sales is expected to be stronger in H2 than in H1;
  • Recurring operating income significantly improving in H2 compared to H1 due to savings and restructuring. Strong negative recurring operating margin over the year.
• Deployment of HR measures of the adaptation plan: short-time working in H2, the Group "Activity Transformation" agreement in France impacting provisions for profit sharing 2020;
• Decrease in R&D expenses by around Euro 450 million compared to 2019;
• Level of Capex outflows down by Euro 200 million between 2019 and 2020 reflecting the confirmed reduction in commitments of 60% compared to 2019.

36 Safran / H1 2020 earnings / July 30, 2020

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5

Q&A

Philippe PETITCOLIN - CEO

Bernard DELPIT - Group CFO

37 Safran / H1 2020 earnings / July 30, 2020

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6

SAFRAN AND THE

CHALLENGES OF

CLIMATE CHANGE

38 Safran / H1 2020 earnings / July 30, 2020

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Key messages post Covid-19 crisis

Green aviation will emerge from the crisis as a major trend. The impact of the crisis on air traffic should lower CO2 emissions compared to pre-crisisanticipations but Safran will reinforce its commitment and actions to address the climate change challenge.

Safran makes climate change a central part of its technological solutions

• Cost-cuttingplan maintains the environmental priorities of Safran R&T and Innovation roadmap
• Safran is working on the next generation of low carbon aircraft and, together with its partner GE, on the successor to the LEAP engine, which is expected to offer fuel savings equivalent or superior to the fuel savings achieved by the LEAP compared to the CFM56.

Safran R&T environmental priorities are fully in line with the ambition of the French plan for the aerospace industry, announced in June 2020, targeting a zero emission aircraft in 2035

• Safran will benefit from the public financing of R&D programs over 3 years for the sector
• Safran works on different solutions: ultra-optimized thermal propulsion, intensive utilization of sustainable fuels for aviation, use of liquid hydrogen
• A major milestone to select the most advanced technology should be reached in 2025

Research on breakthrough aircraft, low carbon aviation by 2030-2035 and towards carbon neutrality by 2050, remains the key focus of Safran's strategy in response to the challenge of climate change.

39 Safran / H1 2020 earnings / July 30, 2020

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Top priority: reduce aviation's carbon footprint

Covid-19 crisis on air traffic could impact CO2 emissions in 2050 compared to pre-crisis curves.

It does not pause the aerospace sector commitment for green aviation.

Aviation today accounts for 2% of worldwide CO2 emissions

In 2008, the Air Transport Action Group (ATAG) set an ambitious objective of reducing CO2 emissions by 50% in 2050 in relation to 2005

• Without taking into account the impact of Covid-19 crisis, with forecast air traffic growth of 4%/year (= a 3.5-fold increase by 2050), meeting this goal meant a 90% improvement in average emissions per passenger/kilometer (2015 fleet)

(1)

(1)

(1) : without taking into account the impact of Covid-19 crisis

40 Safran / H1 2020 earnings / July 30, 2020

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Transition towards carbon neutrality

The French plan for the aerospace industry, announced in June 2020, is targeting a zero emission aircraft in 2035.

• Safran R&T environmental priorities fully in line
• Government support will allow Safran to maintain a high level of R&T activity in the next years, offsetting the decrease in its self-funded expenses due to the crisis

Safran works on several different solutions :

• Ultra-optimizedthermal propulsion, with the successor to the LEAP engine, which is expected to offer a consumption saving at least equal to the reduction achieved by LEAP compared to CFM56
• Intensive use of drop-in sustainable fuels
• Exploring the liquid hydrogen solution

• Most advanced technology should be selected in 2025

41 Safran / H1 2020 earnings / July 30, 2020

(4)

1. In-flightemissions & emissions/capture related to fuel production close to zero by 2050.
2. Target date for aircraft in service.
3. New aircraft release bringing twice the usual next-generation gain (15%).
4. Liquid hydrogen solution potentially advanced to 2035 if proven to be the best solution thanks to research performed until 2025 to address technological challenges associated.

This document and the information therein are the property of Safran. They must not be copied or communicated to a third party without the prior written authorization of Safran

7

ADDITIONAL

INFORMATION

42 Safran / H1 2020 earnings / July 30, 2020

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Shareholding status 06/30/20 (versus 12/31/19)

Equity as of December 31, 2019

Number of shares: 427,234,155

Public

81.4%

French State

11.2%

Employees

6.8%

Treasury shares

0.6%

Voting rights as of December 31, 2019

Number of exercisable voting rights: 529,824,346

Public	French State
71.1%
	18.1%

Employees

10.8%

43 Safran / H1 2020 earnings / July 30, 2020

Equity as of June 30, 2020

Number of shares: 427,235,939

Public

81.4%

French State

11.2%

Employees

7.3%

Treasury shares

0.1%

Voting rights as of June 30, 2020

Number of exercisable voting rights: 556,107,923

Public	French State
72,2%
	17,2%

Employees

10.6%

This document and the information therein are the property of Safran. They must not be copied or communicated to a third party without the prior written authorization of Safran

H1 2020: Research & Development by activity

			Aircraft
(In €M)	H1 2020	Aerospace	Equipment,	Aircraft
Propulsion	Defense and	Interiors
			Aerosystems
R&D expenses	(447)	(160)	(185)	(102)
as a % of revenue	5.1%	3.9%	5.1%	9.5%
Tax credit	74	32	40	2
R&D expenses after tax credit	(373)	(128)	(145)	(100)
Gross capitalized R&D	124	25	59	40
Amortised R&D	(124)	(57)	(57)	(10)
P&L R&D in recurring operating income	(373)	(160)	(143)	(70)
as a % of revenue	4.3%	3.9%	3.9%	6.5%

44 Safran / H1 2020 earnings / July 30, 2020

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H1 2019: Research & Development by activity

			Aircraft
(In €M)	H1 2019	Aerospace	Equipment,	Aircraft
Propulsion	Defense and	Interiors
			Aerosystems
R&D expenses	(651)	(265)	(274)	(112)
as a % of revenue	5.4%	4.5%	6.0%	6.8%
Tax credit	83	32	47	4
R&D expenses after tax credit	(568)	(233)	(227)	(108)
Gross capitalized R&D	152	44	78	30
Amortised R&D	(144)	(55)	(82)	(7)
P&L R&D in recurring operating income	(560)	(244)	(231)	(85)
as a % of revenue	4.6%	4.1%	5.1%	5.2%

45 Safran / H1 2020 earnings / July 30, 2020

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OE / Services revenue split

Revenue	H1 2019	H1 2020	% change
Adjusted data
OE	Services	OE	Services	OE	Services
(in Euro million)
Propulsion	2,492	3,410	1,534	2,513	(38.4)%	(26.3)%
% of revenue	42.2%	57.8%	37.9%	62.1%
Equipment, Defense &	3,084	1,469	2,478	1,160
Aerosystems	(19.6)%	(21.0)%
67.7%	32.3%	68.1%	31.9%
% of revenue
Aircraft Interiors	1,193 (1)	447	753 (1)	319	(36.9)%	(28.6)%
% of revenue	72.7%	27.3%	70.2%	29.8%

(1) Retrofit is included in OE

46 Safran / H1 2020 earnings / July 30, 2020

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Quantities of major aerospace programs

Number of units delivered	H1 2019	H1 2020	%
LEAP engines	861	450	(48)%
CFM56 engines	258	84	(67)%
High thrust engines	234	197	(16)%
Helicopter engines	335	275	(18)%
M88 engines	22	19	(14)%
787 landing gear sets	84	62	(26)%
A350 landing gear sets	41	26	(37)%
A380 nacelles	12	8	(33)%
A330neo nacelles	51	20	(61)%
A320neo nacelles	280	248	(11)%
A320 thrust reversers	105	29	(72)%
Small nacelles (biz & regional jets)	304	246	(19)%

Number of units delivered	H1 2019	H1 2020	%
Lavatories A350	400	199	(50)%
Spaceflex V2 A320 (lavatories +	197	167	(15)%
galleys)
Business class seats	2,537	1,689	(33)%
Emergency slides A320	2,398	1,524	(36)%
Primary power distribution	561	417	(26)%
system 787

47 Safran / H1 2020 earnings / July 30, 2020

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Smooth and lengthened debt profile with the new 2027 convertible bonds and the 2030/32 USPP

Debt maturity schedule - Long term borrowings at inception (M€)

48 Safran / H1 2020 earnings / July 30, 2020

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Customer financial guarantees

(In $M)	Dec. 31,	June 30,
2019	2020
Total guarantees	26	12
Estimated value of pledges	22	10
Net exposure on these guarantees	4	2
Provisions	2	2

Total guarantees remaining at a historically very low level in the absence of request for the implementation of new manufacturer financing

49 Safran / H1 2020 earnings / July 30, 2020

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50 Safran / H1 2020 earnings / July 30, 2020

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