Safran S.A.

Thank you. Good morning, everyone.

I am pleased to welcome you to Safran's first half 2023 earnings call. I'm now with Pascal Bantegnie, our CFO.

Let us go straight to Page 4 with the summary of our talking points today. Air traffic recovery is continuing.

Narrowbody ASK are now trending above 2019 level. The Paris Airshow has been a great success with a good commercial momentum for Safran with new orders and strategic agreement.

We are posting an excellent financial performance in H1 in profits and cash, mostly driven by civil engines activity. Portfolio management is progressing well with the closing of Aubert & Duval acquisition, and divestment of Cargo and Catering in Q2.

We are enthusiastic about the potential acquisition of Collins Aerospace flight control and actuation business announced last Friday. We are pleased to raise our full year 2023 outlook on the [Technical Difficulty] particular civil aftermarket growth is now expected to be up in the mid- to high-20s, supported by a solid momentum on CFM56 aftermarket.

We continue to ensure attractive returns for shareholders with the launch of a share buyback program. I'm now on Slide 5.

Narrowbody ASK now exceed 2019 level in Q2 2023 at an average of 104% of 2019 level. CFM flight cycles also surpassed their 2019 level.

All geographies trend above 2019 level with 2 exceptions: Europe, which includes a lower traffic in Russia; and Asia Pacific outside of China. Airlines continue to fly second generation CFM56-powered aircraft as demonstrated by the low level of retirements, 94 in H1 2023.

Our assumption for air traffic narrowbody ASK is now to be above 2019 level for the full year of 2023. On Slide 6 now, let me share with you some of our main business achievements in 2023 so far.

On the left-hand side, in Propulsion, total deliveries of LEAP engines stood at 785 units, up 320 units or plus 69% versus H1 2022. It is also a sequential increase of 14% in Q2 versus Q1 2023.

We are on track with our target to deliver 1,700 LEAP in 2023. Civil aftermarket was strongly up at 36.5% for the first 6 months with Q2 2023 at 35% year-on-year, after an increase of 38% in Q1.

It is worth mentioning that Q2 2023 civil aftermarket revenue exceeded Q2 '19 level, the first since COVID crisis. We have been pleased to announce at Paris Airshow some CFM commercial wins with airlines such as Avolon and Jet2.

We also announced earlier in May a significant order from Ryanair. In helicopters, we have signed an MOU with MTU from Germany to create a 50-50 joint venture to develop a new helicopter turbine for the European Next Generation Military Rotorcraft slated to enter service by 2040.

Safran and HAL from India have also decided to form a joint venture to co-design and produce a new generation helicopter engine in India. The first objective is to build the most adequate propulsion solution for the future 13-ton Indian multi-role helicopter and its naval version.

In Equipment & Defense, we announced at Paris Airshow some new contracts. Wisk Aero selected our SkyNaute navigation system for its autonomous air taxi.

We also signed the First Patroller export contract with Greek Army for 4 new Patroller tactical drones. In Safran Seats, we have signed a contract for up to 24,000 economy class seats for the 737 MAX aircraft.

On Slide 7 now, I would like to [Technical Difficulty] strategy. On our CFM RISE demonstrator program, Safran is coordinating the demonstration of a new Open Fan engine technologies within the frame of the Clean Aviation joint undertaking project named OFELIA, which stands for Open Fan for Environmental Low Impact of Aviation.

OFELIA consortium is set to receive EUR 100 million in European funding from Clean Aviation. In electric/hybrid propulsion, we signed an agreement with a company named Electra out of the U.S.

to develop a turbogenerator for the propulsion of its hybrid electric aircraft, short takeoff and landing aircraft. We signed a partnership agreement with Aura Aero, also from France, for the ERA, Electrical Regional Aircraft propulsion.

We have announced the installation of automated production lines specifically for our electric motor ENGINeUS in Niort, France, and Pitstone in the U.K. This high-volume production model inspired by the automotive sector will enable up to 1,000 models to be manufactured per year from 2026 to serve the booming electric and hybrid aviation markets.

Now on Slide 8, a quick overview of Safran's financial performance in H1 2023. Revenue has been growing by 28% year-on-year, with a sequential growth in Q2 of 8%.

Recurring operating margin was up 0.6 points, representing a 33% increase in recurring operating income. Free cash flow reached EUR 1.5 billion, driven by customer advanced payments on Rafale export contracts.

All in all, despite supply chain challenges and continuing inflationary pressure, we were able to benefit from the top line recovery to improve profitability and generate strong cash flows. Now, Pascal, the floor is yours for more detail about our financial performance.

Thank you, Olivier, and good morning, everyone. I will be commencing today the adjusted accounts for which a bridge from consolidated statements is presented in Page 10.

Same adjustments as before is relating to FX or PPA. The number circled in the table, EUR 1.3 billion, reflects the change in mark-to-market of instruments hedging future cash flows, which are recorded in financial income.

Mark-to-market is reducing with a weaker dollar compared to December 31, 2022. As you know, it's a pure accounting entry.

No cash impact as our derivative instruments will hedge future dollar cash inflows. On the same topic on Slide 11, we continue to add new hedges in H1 2023 taking advantage of an attractive dollars.

Net absorption being exercised in the period, the hedge book decreased by about $3 billion, covering our exposure for the next 4 years. In 2023, we confirm a hedge rate of $1.13 compared to $1.15 last year.

On average, the euro-dollar spot rate in H1 2023 of $1.08 compared favorably to H1 '22, providing a positive impact on sales. In order to reflect the recent weakening of the dollar, the 2023 revised guidance is now based on a spot rate of $1.10, and it was $1.05 in the initial guidance.

I remind you the sensitivity, for each cent, it's about EUR 100 million of sales. On Page 12, we have a summary of the income statement.

Beyond sales and profits, which I will detail in a minute, we had total one-off items of EUR 57 million. We have impaired several programs in Aircraft Interiors, both in Seats and Cabin for a total of EUR 35 million, and booked restructuring cost for EUR 13 million, part of that is coming from Cabin, where we continue to transfer part of the production from the U.S.

to Mexico. Financial income is positive this semester with returns on cash invested exceeding cost of debt.

Our cash resources today are invested in instruments providing 3 to 3.5 return. Tax rate comes at 22.7%.

And the net income to the parent is mostly doubling at a bit more than EUR 1 billion, EUR 2.48 per share. On revenue, Page 13.

Adjusted revenue reached EUR 10.9 billion, up 28%, 26% organic, with some acceleration in Q2 driven by the significant ramp up in OE, especially LEAP deliveries and services across the board. As discussed in the previous slide, a stronger dollar had a positive impact on sales when translated into euros.

And there is a minimal impact in terms of scope, mostly driven by the acquisition of Orolia back in July 2022. Same chart on recurring EBIT on Page 14.

Margin improved by 0.6 points to 12.8% of sales. This performance has been driven by an excellent performance in civil engines, LEAP OE, thanks to a high share of spare engines and by CFM56 spare parts.

Services in all the other divisions, typically on carbon brakes, which is highly correlated to air traffic, maintenance of aero safety systems or services in Seats and Cabin. And the positive currency impact reflects the EUR 0.02 improvement in hedge rate year-over-year.

Moving to performance by activities in the next 3 slides, starting with Aerospace Propulsion on Slide 15. Revenue was EUR 5.7 billion, up 34% on organic basis.

OE revenue was up 56% with very strong deliveries for LEAP engines. Q2 deliveries were up 14% sequentially.

And, as Olivier said, we are on track with our full year target of 1,700 LEAP engine deliveries with further increase in production rate in H2 compared to H1 of about 15%. We had a high proportion of spare engines in H1, and H2 should be back to a normal mix of installed versus spare engines.

Services revenue was up 22% organic, essentially driven by civil aftermarket up 37% in dollar terms. Let me give you some color on that.

Spare part sales for CFM56 were strongly up driven by demand, meaning shop visits, price that we raised back in November last year, and even work scope was up, I would say, slightly. Shop visits were up in Q2 year-over-year and even sequentially, and we are on track with our full-year target indication of around 2,000 CFM56 second gen shop visits.

Spare parts for high-thrust engines grew at high single-digit rate, and service contracts, both CFM and LEAP, grew at a good 2-digit rate, including the contribution of LEAP engines under the RPFH contracts with -- which, as you know, come with no margin up to 2025. On the helicopter engine business, we had a slight positive contribution in revenues with higher OE deliveries, but aftermarket was impacted by supply chain issues.

Overall, the recurring operating margin came at 18.5%, showing a nice 1.2-point margin improvement. Equipment & Defense sales at EUR 4.1 billion.

It is up nearly 40% organic, driven by a solid growth in services, which are up 25%, strong recovery across the board, nacelles, carbon brakes, aero systems. But in landing gear [ and aero ] services, we were impacted by the supply chain difficulties.

OE revenue was up by a slight 8% organically, thanks to higher volumes on the 787 in landing gear and our power generation activities, and we also benefited from higher volumes on fuel and fluid systems. Here again OE sales were impacted by revised demand and supply chain issues.

Electronics and defense contribution in revenue was positive. We had higher deliveries of FADEC, the LEAP electronic control in guidance systems and services in avionics.

Recurring operating margin came at 11.4%, slightly down compared to last year. Growth in services was offset by inflation, higher R&D expenses and supply chain difficulties, notably in landing gear activity and avionics.

Finally on Aircraft Interiors, sales of EUR 1.2 billion, up 34% organic. This is still 41% below the 2019 level.

So we have not yet recovered in terms of sales. OE was up 25% organic.

Higher volumes in the floor-to-floor and custom cabin activities. You would see that business class seats deliveries were significantly down in H1 '23 compared -- sorry, with shipments expected to resume later in the year once certification is reached on some programs.

Services were up 55% organic, both in Seats and Cabin. Nevertheless, the division posted a loss of EUR 100 million in H1 2023 with one-off EUR 33 million depreciation of operating assets, mainly an impairment charge for obsolete inventory and losses on 2 programs facing engineering and certification issues.

On Cabin, our priority is cost, and we are on track benefiting from restructuring measures to deliver operating breakeven for the full year. You would note that the divestment of Cargo and Catering activities from June will have a negative impact on H2 performance.

On Seats, our priority is execution. Clearly, the performance recovery takes longer than anticipated.

Top line is satisfactory, notably industrial markets with sales resuming to 2019 levels in June. The underperformance is coming from engineering delays and production cost overruns and the target to operating breakeven is now pushed to Q4 2023.

On Slide 18, free cash flow was EUR 1.5 billion. Again, this is an excellent performance driven by a couple of reasons.

EBITDA increased more or less in line with EBIT by EUR 300 million. We had, again, a positive impact from working cap.

We did receive significant customer advance payments from the Rafale export contracts. We had deferred income increase by EUR 400 million, notably thanks to the LEAP RPFH contracts, the helicopter service by the Aura contracts and even from the carbon brakes pay-per-lending contracts.

And this is partially offset by EUR 1 billion increase in inventories in order to prepare the upcoming ramp up in production. Cash outflow coming -- cash outflow related to CapEx increased to support growth.

H2 free cash flow should come back to a more normal EBIT to free cash flow ratio of 75% as Rafale prepayments were front-end loaded. On Slide 20 (sic) [ Slide 19 ], net debt came out at EUR 263 million with a free cash flow of EUR 1.5 billion.

We paid a dividend of EUR 1.35 per share back in June. We completed our share repurchase program related to the 2027 convertible bonds for a total amount of EUR 947 million.

And we had one additional financial investment in non-cash equivalent for EUR 200 million. So, we continue to enjoy a very strong balance sheet with a gross cash position of EUR 6.1 billion and almost no leverage.

Switching to Slide 20. As I said, we have now completed our liability management transaction, which we announced back in October to eliminate 2.2% potential dilution from the 2027 OCEANEs convertible bonds.

So, we have repurchased 9.4 million shares for a total of EUR 1.2 billion, and these are held now in treasury shares. By the same logic, we are now launching a share repurchase program of up to 4 million shares with the aim to fully eliminate the risk of equity dilution of nearly 1% coming from the outstanding 2028 convertible bonds.

Market permits, this plan is intended to be executed before year-end. Our current share price, this plan represents nearly EUR 600 million of cash outflow.

We're also executing the purchase of EUR 2 million shares for the employee profit-sharing scheme, namely the performance and free share grants. Last but not least, we are now launching a EUR 1 billion share buyback program for share cancellation.

This plan is to be executed before the end of 2025. At current share price, it represents about 7 million shares.

So if I add up the 3 upcoming plans, we intend to buyback around 13 million shares in the next 2 years for a total of nearly EUR 2 billion. Olivier, back to you.

Thank you, Pascal. On the back of a solid performance in H1, we confirm our adjusted revenue target despite less favorable euro to dollar spot rate assumption, which is now at $1.10 versus $1.05 initially.

We raised our EBIT outlook to reflect better dynamic in civil engines. Civil aftermarket revenue now expected up mid- to high-20s.

It is worth mentioning that the CFM catalog list price increase is anticipated earlier this year and elevated. We expect full year 2023 civil aftermarket revenue to get back to 2019 level.

We raised our cash outlook to reflect significant customer prepayments. Supply chain remains a watch item, but we feel confident to deliver this raised guidance.

Thanks for your attention. Pascal and I are now ready to answer any questions you may have.

Thank you.

And first question is on traffic and on your assumptions for 2H narrowbody traffic in China more specifically when we think about the civil aftermarket guidance. I think we have all seen and heard from you in terms of the updated assumption for ASK to be above 2019 levels this year, but some color on whether you are baking a sequential ASK improvement or not in 2H versus 1H civil [ gap ] would be helpful.

The second question is on LEAP OE. And if you could please provide us with some reference points in terms of the LEAP OE contribution that you have seen in your EBIT bridge in the first half?

And possibly tell us a bit about your expectation for the full year, for example, if you expect this segment to be neutral or to be a significant headwind for the full year? And final question, possibly, is just commentary on M&A outlook from here.

I think from the recent M&A call, we got some color on how you think about positioning yourself for the next-gen platform and more strategic autonomy in a more fragmented world. I was wondering as such, if the CMD guidance was, therefore, updated.

In particular, if I remember well, you had said that the [ Patroller ] optimization plans should be globally accretive for group margins over the plan. So how should we think about this as well, please?

Victor, I will take the first one. I don't have specific details on the traffic for H2 and the, let's say, the step increase in Q3 and in Q4 versus Q2.

All I can say is that, we have planned that the 2023 traffic would be, overall, in full year, same level as 2019. And the point is, we have reached that in Q1, and in Q2 we are exceeding.

We are at 104%. So we expect Q3 not to go below Q2 and potentially stepping up a bit and certainly not going down.

Same for Q4, we might be wrong, but this is our assumption today and, therefore, overall full year will be above 2019 levels. Maybe I will let Pascal elaborate on the LEAP OE contribution.

Yes. The motto at CFM is to keep our customers flying.

There is no aircraft on the ground, meaning that within the volume of LEAP OE deliveries in H1, a good portion of that were what we call spare engines in order to fuel our pool of spare engines and to continue to support our customers. So from an EBIT contribution perspective, it has a nice contribution to our global EBIT.

So, I would say, we were breakeven in H1 in terms of LEAP OE contribution. As I said, in H2, we should be back to a more normal mix of installed versus spare engines.

So you would expect, again, a negative EBIT contribution in H2. And as we said many times, 2025 is the date by which we should achieve globally OE breakeven for LEAP.

On M&A, does it impact our CMD guidance? The answer is no.

The answer is no. Yes.

The answer is no. And as you remember, we are on track to basically revise our portfolio of activities, especially the one coming from the ex-Zodiac activities, and basically, we have achieved to date about -- the disposal of about 10% of the ex-Zodiac portfolio as we talk.

Let me may be give you some color, specifically on 2023. I would like you to keep in mind that we are now consolidating Aubert & Duval through the equity method, 1/3 of equity of Aubert & Duval.

This is coming as a negative contribution in 2023. We have also divested Cargo and Catering, which did enjoy a positive EBIT over time.

So this is coming, again, as a negative in H2 performance in Safran Cabin. Orolia, which we acquired last year is performing as per plan.

It has been well integrated into our Safran Equipment & Defense, electronics and defense branch. So it will positively contribute to our business.

And then Collins actuation and flight control business is only to be consolidated from 2025. As we've mentioned during the call last week, in 2025, it will be dilutive to the global Equipment & Defense activity.

But by '27-'28, we should be at the same level as we enjoy in Equipment & Defense.

A couple from me. First of all, Olivier, obviously, your competitor is having a few problems with its narrowbody engine at the moment.

And I was wondering if there are any opportunities for CFM to potentially benefit from these problems. And then secondly, on your acquisition of Aubert & Duval that closed in the first half.

How much sort of cash investment do you think Safran will have to put into this business over the next few years?

Robert, yes, I will not specifically comment on our competitors' issues. This is coming on top of previous one.

I can only say that, as you remember, our win rate in 2022 was 70% on A320neos, our win rate. In the first half of 2023, we are well above that number.

We are north of that. And we've enjoyed big orders on the A320neo.

So, I guess, there could be a potential, let's say, how could I say that, orientation of customers towards us. I'm glad to say, I'm proud to say that LEAP is considered the engine of choice today by the airlines and by the market.

Now, are we going to have pressure from, especially Airbus to deliver more? I don't think there is to deliver more in the months to come.

I don't think there's going to be an impact for 2023. If there are going to be an ask from Airbus for 2024 and onwards, I don't know yet.

It's too early to say. On Aubert & Duval, the plan -- the investment plan for the 3, 4 years to come is about EUR 300 million that are going to be shared by the free shareholders of Aubert & Duval.

So if you wish, for us, it's about 1/3 of it as the investment that is going to be required to reshuffle Aubert & Duval and to increase the capacity.

I have a couple of small ones. In Interiors, you mentioned 2 programs where you have impairments.

Have the programs been discontinued or will they come for delivery in the future with effectively no profit? And second question, I would like to come back on Collins actuation, and I'm trying to understand why the margin was so low in 2019, so pre-COVID effectively, trying to understand what explains that.

If you could help me with that?

On Interiors, the programs are not discontinued. We have 2 customers that we will serve starting from H2 once these programs will be certified.

So it's clearly a depreciation of operating assets, but we will deliver this equipment starting from H2.

Olivier, on Collins side, I can only reiterate what we said last week. I am confident that we are going to be able to raise the operating margin of this asset in the years to come through our cost synergies on one side.

And also, the full exercise of, let's say, the escalation formula that gives us opportunities to escalate price, both on the OE side and on the aftermarket side. So -- and to me this leverage has not been fully exercised in the past years.

Another element which has been a key element of negotiation with Collins as they are going to continue to represent with 25% of our turnover. We have negotiated a nice and friendly escalation formula for the nacelle actuation business above, let's say, the -- what was done in the past.

So this basically gives us confidence that, yes, indeed, as Pascal has mentioned, we can elevate the operating margin of these assets by low- to mid-teens in the years to come.

First question on Interiors. So the last few years, we understood the Interiors challenge is being a demand problem.

But now demand is coming back, your sales has been recovering. So it doesn't seem like it's a market share issue, yet the losses have continued to be greater than expected.

So what is the root cause of all this lack of visibility? And what gives you confidence now that you have the site of path to address the issues and turn around the losses?

And second question on civil aftermarket, strong performance. At the same time, we keep hearing about the supply constraints at MRO shops.

And I understand your spare parts are not subject to the same supply constraints. But what about the concern that the strong shipment is simply adding to the inventory of spare parts at the MROs?

So do you have any visibility into the channel inventory there?

George, on Interiors, we have 2 different dynamics on Cabin on one side and Seats on the other side. But keep in mind that we are still 40% below 2019 revenues.

So basically, just market-wise, this segment of activity is lagging behind Propulsion and Equipment, just market-wise. As you know, basically, the demand is driven by the appetite of airlines to retrofit Cabin or to -- and this is really a decision that they can take or delay.

So we are minus 40% versus 2019 in turnover. So that is something that you need to keep in mind.

On the Cabin side, the real priority is cost. We are on plan.

We are on plan with the transfer of activities from U.S. sites to Mexico.

So basically, the low-cost content of our Cabin activities is increasing over time. We should be completed by end of this year or beginning of next year with our overall transfer plan on Cabin.

So, I expect that we will be breakeven in 2023. Remember, we were breakeven in Q4 2022 for Cabin.

So I expect we will be breakeven by -- for the full year of 2023 despite the disposal of Cargo and Catering that is going to have an impact versus 2022, which basically we evaluate around EUR 15 million, Pascal?

Yes, correct.

Of profit that is going to be lost because of the change of scope. So this is for Cabin.

We are on track on Cabin. On Seats, we -- in the last 3 years, we have completely renewed the product line.

We have invested significantly to renew the product line. And I can tell you that the -- this is an attractive product line as I could witness, I could see at the last Hamburg Interior Show.

There is a very strong appetite from our airline customers for our renewed product line. And our market share on Seats, basically, is around 35%.

So we have a very strong market share. There was a very strong commercial dynamic because our customers do like our new product line.

That's one element. The other element that we have achieved and that is completed is the footprint optimization on Seats.

This is behind us now. We have closed sites.

We have transferred activities to Mexico on one site from the U.S. and to Tunisia from Europe in Germany -- from Germany to Tunisia and Czech Republic.

And so, basically, the footprint rationalization and optimization is behind us now. So this is achieved.

So what is now ahead of us is to fully master the development cost and also ensure that, on the development process, we are on cost, on quality, on time. And today, this is still ahead of us.

So we need to do some stronger -- there's a strong focus and strong effort to now mature and recover the development process that basically was not very active in the last 2 to 3 years, just because it was the pandemic. And so, there was no appetite.

There has been -- there had been no orders in 2020 and beginning of 2021. So the development activity was basically very low.

And now it's booming back again, and we are thus over cost. So this is basically our challenge ahead of us.

The good news is that, the aftermarket has come back to the pre-crisis level in June. So, we believe in H2 2023, this is going to help us because we will have come back to the pre-crisis level.

And we expect that there is going to be, let's say, a big step up in our operating margin in H2 versus H1. There is a significant dissymmetry of revenues between H1, where the revenues were very low and H2, especially in business class deliveries.

And so, we aim at reaching breakeven in Q4. And this is 1-year lag versus what we had in mind and what we communicated last year.

George, on your second question on civil aftermarket. I will say there is a combination of higher traffic than we expected, and a ramp up in new aircraft deliveries, which is taking place but maybe at a smaller rate, meaning that airlines today fly 100% of the LEAP-powered aircraft, but also they put back into service some part CFM second generation -- CFM56 second gen-powered aircraft to traffic.

So it triggers strong demand for aftermarket. So there is still capacity in the MRO domain to absorb the more or less 2,000 shop visits we continue to expect this year.

And we did not notice that they are adding inventories or using the parts in the shops to maintain and repair the engines. We don't see any buildup of inventory to answer your question.

Yes, Ian at UBS. I have 2 questions, please.

So the first on the free cash flow guidance. The EUR 2.5 billion that you used to have excluded Rafale and the EUR 2.7 billion, now of course, includes some Rafale down payments at least from the first half.

Should we assume, therefore, that the increase in the free cash flow guidance is de minimis? So there's no real underlying change?

Or is there an underlying improvement as well? The second question is on spare engine sales, at least versus my expectations, OE sales beat my expectations materially but Propulsion margin was also ahead of my expectations.

So I'm assuming there is a material increase in spare engines proportion within that. Maybe you could provide a comment.

And also perhaps any forward commentary on how that might track over the next months and years as well.

Ian, on free cash flow, our EUR 2.5 billion guidance already included Rafale down payments. By the way in H1, we had more or less the same amount as we had in H1 2022 coming from 2 customers, Greece and the United Arab Emirates.

So, the improvement in the free cash flow guidance is not coming from a change in assumptions regarding Rafale prepayments.

I'll take the second question. On the spare engine in H1, there has been a very strong level of spare engine delivery in H1, above normative level, because we wanted to support our airline customers.

You know we have a policy of keep our customers flying. This is a real differential versus our competitor.

We keep our airlines flying all the time. There is no disruption, never.

And so, we decided to basically support heavily our customer demand for spare engines in H1. And so, the ratio basically in H1 has been north of 10% -- well above 10%.

So this does explain basically what Pascal has described. We don't expect that that's going to be the same in H2.

And the first one was on Equipment. You said at Q1 that you expected OE to be broadly stable.

But it looks as though it actually did grow the OE side of the equipment business in Q2. So I was just wondering if you could comment on that.

And how we should think about that for the full year? And then secondly, following up on that question there, just on LEAP in general, the deliveries did look pretty good in Q2.

How are you seeing supply chain in LEAP in general?

Ben, back to my comment in April for Q1, remember that the OE growth in Equipment was more or less flattish, and I did mention 2 root causes. First one was supply chain issues, and we can confirm that in some parts of our Equipment business we suffer from shortages in some components.

And we also mentioned revised demand from airframers. So, Q1 was flat.

H1 is up 8%. So compared to what we see in Propulsion and Aircraft Interiors, you would agree this is quite a smaller number.

So Q2 was up. For the full year, I would not expect such a material increase.

So, I would say, high single-digit, maybe 10% growth on OE, but not more than that, except if we were to see some relief in the supply chain, which we do not anticipate today.

Okay. Ben, as a complement to what Pascal has just said, be mindful that on the Propulsion side, basically, we are exposed to Airbus and Boeing.

And so, the delivery of OE engines, basically, is driven by Airbus and Boeing demand combined. Whilst on the Equipment side, we are mostly driven by Airbus demand to the exception of 787.

So that's basically the big difference. And your next question was supply chain on LEAP.

Yes. Well, we -- I mean, we are still navigating through supply chain challenges every day, everywhere, that's for sure.

The fact is that, we manage it quite well on the Propulsion side. And, yes, basically, I'm very confident that we will achieve our ramp up on LEAP, and we will deliver, as expected, by both airframers, Airbus and Boeing on the Propulsion side.

The issue is slightly more difficult on some of our Equipment as Pascal has said, especially landing gear, where basically the supply chain issues are more acute. And this is also, it does also explain, let's say, the OE, as well as we have some issues on spares as well on landing gear today because of supply chain issues.

But overall, we are navigating through that. It's our #1 focus.

We believe it's going to last all of the year and probably extend into next year.

The first is just on pricing in civil aftermarket, just wondering how much earlier you are raising prices this year. I think GE might have mentioned August.

And what the magnitude of this increase is, whether it's double-digit or not? Secondly on the buyback.

On Slide 20, you've mentioned the target periods of '24 to '25 for the EUR 1 billion buyback. Does this mean that you need to complete the OCEANE 2028 and the employee profit-sharing scheme prior to starting this?

And just lastly on the LEAP. I think CFM programs also use powder metals in some parts.

I was just wondering on your confidence around the fact there isn't the same issue of contaminants to LEAP engines and an inspection program will be required.

I will take the first one and the third one. I will let Pascal respond on the buyback.

On the pricing side, yes, together with our partner, GE, we have decided to anticipate our price increase. And, yes, I confirm this is going to occur in August.

So, 4 months earlier than what we used to do before. And the catalog list price increase is going to be high single-digit.

On, let's say, what has been announced by our competitor. I just simply do not know what their issue is, and just I cannot comment specifically on our competitor's issue.

What I can say is on CFM side. We detected in summer 2021, qualities while inspecting rotating parts, and we have completed the root cause investigation at the time.

This was resulting from a contamination of powder metal at once you play a facility for a limited number of batches. We have taken all corrective actions, and we have proactively communicated to our customers via service bulletin.

We have planned and we have implemented a staggered removal program in the course of the shop visit cycles. There has been no engine failure.

There has been no customer disruption, and the financial impact is fully included in our guidance.

Ross, on your buyback question, I will confirm that our intent is to execute the liability management program, which consists of buying back 4 million shares in H2, as well as buying back shares for 2 million shares for the employee profit-sharing scheme. So it's a total of 6 million shares that we intend to repurchase during the course of the second semester, and then we will start early 2024 our EUR 1 billion share buyback program for share cancellation.

The first one is regarding the ability you have potentially to get some price increase as well from your suppliers. I mean, you mentioned an increase in tariff, for example, on the Propulsion side in August.

Do you believe most of the tariff increase on the supplier side from your side has been passed or there are still some to come? And could it be as well after the August period?

And the second question is regarding your cash flow, which has been pretty good. You have received some good prepayment.

I was wondering, do you believe for you there will be some logic to pass some of those prepayment to some people in the supply chain? We have much problematic issues on the cash side to enable to unlock some of the issues, especially on the recruitment for some of them.

Herve, I will take the first one and Pascal will take the second one. Yes, indeed.

We have strong pricing pressure from our suppliers, especially raw material suppliers, forging suppliers, casting suppliers, but also all along the chain. And as you remember, Pascal have mentioned earlier this year that, basically, the overall impact of inflation was about 3% on our operating margin, 3% gross impact considering both inflation, energy cost, salary increase, everything.

And he said that we would pass the main portion of it to our customers through escalation, formulas and pricing, but not all of it. So we have to manage to basically swallow part of it and compensate through performance action.

But basically, the pass-through is not 100%. We have to swallow part of it.

Herve, on your second question, as you know, the #1 priority for our industry is to do the ramp up, which is in front of us. So, we are definitely supporting all the suppliers who need notably advance payments in order to invest and start the production, ramp up production, and delivery parts to Safran, but to the whole supply chain.

So, all the Tier 1 equipment suppliers are supporting Tier 2, Tier 3 suppliers for long. So there is no issue that we will keep cash for ourselves.

We try to make sure that the supply chain is in order to absorb the ramp up. Maybe given the queue, I see 4 questions.

We will take 1 last question, and then that will be it for today.

I had a couple of clarification. I would like to be crystal clear on the situation in business class seats and Aircraft Interiors overall.

If I look at the number of shipments that you did in Q2, about 110 business class seats, that's 76% down year-on-year, the lowest level we -- since we are tracking the data. I understand the development difficulties and how it impacted the profitability.

But in terms of shipment, is it like an issue of transitioning the product range, like, you can't deliver the new one until the development have been satisfied and so it's just phasing and timing? Or is there something more that is weighing on the deliveries?

That would be very helpful. And second comment is on the A320 equipment shipments where you're also reporting a decrease in emergency slides and A320 nacelle shipments.

How should we read that? Is it just a matter of quarterly volatility?

Or is there something specific to these equipment activities?

Tristan, as you have seen, basically, we have delivered twice as less business class seats in H1 2023 compared to last year. This is mainly a phasing issue.

So, basically, mean that we have missed some business class planned deliveries in H1 that are going to slip into H2, mainly for certification delays. So, basically, this is driven by, let's say, the development planning and the certification planning.

Every new seat that we have to deliver has to be certified. I mean, we have to run a lot of flammability test, as well as head injury criteria test.

And basically, sometimes those tests are failing and we need to redo the test. So that's basically what we are talking about.

It's really a phasing related to certification planning, nothing else. On A320 equipment, on the, let's say, slides, there's probably a sort of pent-up demand on slides.

This is how I explain it. So we have a very strong demand for our aero safety equipment, both from the airframers, as well as the airlines as well.

And so, I believe it's a sort of pent-up demand, but this is very dynamic. What is more structural, if you wish, is basically the delivery of nacelle and landing gear, because it is more reflecting what the demand of the airframers are.

And, yes, indeed, when Pascal said, when he commented on the Equipment OE growth in H1 versus last year, basically one of the reason of, let's say, the single-digit growth is revised demand -- revised downwards demand from our airframer customers, especially on nacelle and landing gear.

Thank you very much for all your questions, and we wish you a good summer break. And we'll see some of you during the road shows early September.

Bye-bye.

Thank you. Have a good bye.