Safran expects lower engine deliveries in 2020, revising longer term outlook

Safran reported (27-Feb-2020) the following highlights for its full year 2020 outlook:

• Engine production of around 1400 LEAP engines, with an assumption of average production of 10 LEAP-1B engines per week over 2020;
• Adaptation plan to adjust to the Boeing 737 MAX situation, including savings on direct costs, overheads, hiring freeze and a reduction in R&D and capital expenditure for 2020;
• Safran expects for FY2020 an average spot rate of USD1.13 to the USD in 2020, adjusted revenue is expected to decrease in the range 0% to (5)% compared with 2019. Similar variation in organic terms;
• Adjusted recurring operating income is expected to grow around 5% at a hedged rate of USD1.16 to the Euro;
• Free cash flow is expected to be higher than in 2019;
• The outlook is based notably on the following assumptions:
  • Decrease in aerospace OE deliveries (civil and military engines);
  • Civil aftermarket growth in the high single digits, as long as disruption created by the coronavirus on air traffic does not extend beyond 1Q2020;
  • Transition CFM56 to LEAP: Neutral impact on Propulsion adjusted recurring operating income variation;
  • Equipment/Aircraft Interiors: Slight organic growth of sales in Equipment and organic decrease of sales in Aircraft Interiors. Continued improvement in the adjusted recurring operating income of these two divisions;
  • Decrease of R&D expenses in the range of EUR50 million to EUR100 million. Positive impact on adjusted recurring operating income after activation and amortisation;
  • Stable level of tangible investments between 2019 and 2020;
  Medium Terms ambitions:
  • 2022 ambitions are based on assumptions that will need to be updated to reflect the impact of the 737MAX grounding;
  • Due to strong performance across Safran's businesses, the year 2019 was higher than the trajectory taken into account its 2018 to 2022 objectives;
  • New assumptions will recognise the improvement of the targeted hedge rates over the period;
  • Mid-term ambitions will be updated after the 737 MAX return to service and new ramp-up are clarified. [more - original PR]