Peter Campbell – Investor Relations Philippe Petitcolin – Chief Executive Officer Bernard Delpit – Chief Financial Officer

Olivier Brochet – Credit Suisse Christian Laughlin – Bernstein Robert Stallard – Vertical Research Ben Heelan – Bank of America Merrill Lynch Rami Myerson – Investec Christophe Menard – Kepler Cheuvreux

Ladies and gentlemen, welcome to the Safran Conference Call. I will now hand over the call to Philippe Petitcolin, CEO, and Bernard Delpit, Group CFO. Mr. Petitcolin, please go ahead.

Thank you. Good evening, everybody. On today's call, we will discuss our business highlights and revenue for the Q1 2017. I remind you, the press release and presentations are available on our Web site. I would say that we have a very good start of the year. Our numbers are good, and we confirm our outlook for 2017. Let's start with sales. We achieved during Q1 sales of EUR 3.983 million, so a bit over EUR 3.9 billion, which is an increase of 5% versus last year, and 5.5% on an organic basis. Organic growth was driven by continued momentum in the aerospace, notably in Services, Operations, and Equipment, but also Defense posted a strong performance with a 4.5% increase -- growth increase in revenue. As expected, Q1 2017 sales were impacted by equity accounting of ASL from July 1, 2016. I remind you that during the first half of 2016, we added the sales of our space business in our sales, something we don't have anymore in 2017. We had also a positive currency impact mainly due to the strengthening of the dollar. The average spot rate was 1.06 in Q1 2017, stronger than the average spot that I remind you was 1.10 a year ago, and which is also the rate we built into our guidance for revenue growth in 2017, overall, positive momentum in Q1, which puts us on track to achieve our target. Our revenues are really in line with this target. Just an update on the LEAP program before I let Bernard give you more details about the numbers, our production ramp up is in line with our roadmap. We have celebrated with Air India re-entering to service of the 100 engine-nacelle propulsion unit for the A320neo. And we are going to commence delivery of the Boeing 737 MAX in the next coming weeks. And we started already to deliver production engines for Boeing. Altogether, we delivered between Airbus and Boeing 81 engines during Q1. And so far our customers continue to express their satisfaction with engines' availability and performance. Both airlines that we work with are extremely happy with the performance of our engines. And if we look at it, we think really that the cost on [ph] focus on the supply chain readiness and the investments that we made to prepare this unprecedented ramp up are proving to be ripe. At the end of March, the LEAP-1A is in service with nine airlines that have accumulated more than 80,000 flight hours. And we have two additional airlines which have not yet started their commercial operation, but just received their aircraft with our engines, which are Interjet and Virgin America. Virgin America being the first one receiving the A321neo. Regarding the Boeing for the LEAP-1B, we are on track for the entering to service of the 737MAX 8 in Q2. And we have achieved the first flight of the MAX 9 on April 13th, which went extremely well. For the LEAP-1C for the Chinese, we are expecting the first flight in the next coming weeks. Finally, we continue to log more and more orders for the LEAP program. We are now at more than 12,000 engines in our backlog for this brand new program. Regarding the other business highlights, we are executing the transition between the CFM56 and the LEAP. We have delivered more than 340 CFM during the first quarter of the year. The civil after-market index for the Q1 2017 is in the steady growth with 17.7% growth over the Q1 2016. In helicopter engines, the market is still extremely difficult, but we have delivered with the Bell 505 our first Arrius 2R for this new platform. Defense is doing well. We have the growth of our Defense business during Q1, of 5.6%, 4.5% organic which is new, because for many years we had the small reduction of the sales year-after-year. And we told you when we discussed about our guideline for 2017. Now, 2017, the new programs we have in Defense are coming into floor, and we have growth in our Defense business. Just a word on Security, we have achieved and completed the sale of our detection business to Smiths Group, and we are in line to complete the sale of our security and identity business by the end of next month. This is what I wanted to tell you in terms of business highlight. And I will let now Bernard give you more details about the numbers.

Thank you, Philippe. I will go directly to page nine, two words about the FX. We have this quarter a positive inflation impact from the dollar, from 1.10 in Q1 2016 to 1.06 in Q1 this year. And that was partially offset by a weakening Sterling from 1.3 last year to 1.16 this quarter. Page 10; so as Philippe said, strong revenue growth in Q1 EUR 3, 983 million including negative scope impact of EUR106 million coming from space activities, it also includes positive currency impact of EUR89 million, leaving EUR208 million of organic variation or increase of 5.5%. Just to mention that at an average Euro-dollar spot rate, of 1.10, which was the one that we gave for the guidance. The growth in reported revenue would have been 3.4%, which is completely consistent with our yearly guidance of revenue growth of 2% to 3% at an average spot rate 1.10. Page 11, the breakdown of our revenue growth by activity, Aerospace Propulsion, ERU2,360 million, up 2.6% or up 5.2% on organic basis, Aircraft Equipment, EUR1,335 million, up 9.5% or 6.2% on organic basis, and Defense, EUR284 million, up 5.6% or 4.5% on organic basis. So as you can see, growth in revenue was broad based. All activities contributed to organic growth. In Propulsion, revenue increased, and was driven by services, revenue in Propulsion was down 33% or 3.9% or organic basis, due to civil engines' revenue down, as revenue from LEAP engines did not entirely offset lower shipments, notably of CFM56 and high thrust [ph] engine models. Military OE was up, and helicopter turbine sales was down 9% in this quarter. Still on Propulsion, services are up 15.9%, including civil aftermarket market up 17.7% in dollars, driven notably by second generation of CFM56 and GE90 spares. We have also positive momentum in Military Services, partially offset by helicopter support activities down, still impacted by a fall in flight hours for customers in the oil and gas sector, and the grounding of Super Puma fleet. For Aircraft Equipment, the increase of 9.5% is due to both OE and services. OE revenues are up 9.6% due to high deliveries of ship set of A350, A320, and A330. Shipments of 787 were broadly stable, and we experienced a decline in A380 nacelles, and we think it will continue for the rest of the year. Services in Equipment are up 9.3%, driven by carbon brakes and spare parts of nacelles. And for Defense, growth is back up 4.5% organically due to higher revenues for guidance, and positive contribution of the Patroller UAV program for the French Ministry of Defense. Page 12, another change in the hedging landscape; we have increased our coverage of 2020, and keep head rate target for 2017 and '18, and the same range for 2019 and 2020. So, Philippe, follow these guidance.

.: So, with these assumptions we confirm our outlook for 2017 with an adjusted revenue to grow in the range of 2% to 3%, and I remind you, at an estimated average rate of $1.10 over Euro. Excluding the effect of the equity accounting of [indiscernible] on July 1st, 2016, the revenue growth is expected to be in the low to mid single digits. Adjusting recurring operating income close to the level of 2016, and a free cash flow which should represent a little bit more than 45% of our adjusted recurring operating income. Thank you very much. Bernard and I are at your disposal for any questions you may have.

[Operator Instructions] We have a question from Olivier Brochet from Credit Suisse. Sir, please go ahead.

Yes, good evening Philippe, and Bernard. I would have two questions if I may. The first one on the very strong aftermarket in Q1, if you could share with us a bit more granularity on this in terms of the mix between spares and MRO? And is there anything nonrecurring in there and in terms of the content versus volumes of [indiscernible] and prices, if there is anything that is of note. That's the first question. And the second one would be on the discussions with Zodiac. Do you know if you could share with us a bit more on and give us a bit color on the due diligence process that you have at the moment, and how it has changed compared to what you've done, I would say, earlier this year or in 2016, please?

Thank you, Olivier. Regarding Services and the -- how could we explain this 17.7% increase over Q1, I think it's a bit too early to really give you a detail regarding Spares and Services. Both were very good. The Spares business is really good. And -- but the Service is also okay, and so I cannot tell you it's not one, the other one which impacted this growth. Regarding quantity of sub-visits, we still believe that the number we have taken for the full year is one, we should keep even if by definition, if we are higher than the average, we are expecting for the full year, the beginning of 2017 is also higher in terms of quantity of sub-visits. But again as you know there is a lot of evaluations in this numbers year after year, I will remind you that if you look at 2016, we went from 8% to minus 2% in Q3 to go back to plus 12% in Q4, the beginning of the year is really good and again it's good in every sector of this index but it's too early to give a change in our guidelines, we prefer to remain on what we believe is a conservative style.

If I may jump in, there is nothing exceptional in this number.

Absolutely none.

Okay, thank you.

Bernard maybe you could…

Yes, nothing exceptional in Q1, it was in Q2 last year that we estimate, but we have nothing kind of in Q1.

Yes, we compare with apple on apples.

Okay, thank you.

Regarding your second question on Zodiac, again you know you wanted to get some color, you will not get any color from me because I have to stick with the press release we have made on, I'm not talking we are still in discussions, in exclusive discussions with Zodiac and we will update you with when required when we're ready. I cannot tell you more on that.

Okay, thank you.

The next question is from Christian Laughlin from Bernstein. Sir, please go ahead.

Yes, hi, it's Christian Laughlin. Just a couple of questions from me please, so one starting with the lead, if you could just provide and Bernard as well if you could provide some color on how unit costs are going, obviously you're staying on broadly on schedule and the record seems to be going well but if you could just comment on unit cost relative to the business plan or expectations and then with that any concerns on particular suppliers or areas of the supply chain where production yields are tight or there are some quality concerns so far, that is the first question, the second one, I will take a stab at following up on the Zodiac, from a high level could you at least provide some commentary on where you think your decisions points are going to be and in terms of one, two, three, four months or so you would expect to have enough information to make a decision on refining the offer or getting into a more formal stage around the offer for Zodiac that would be helpful?

I will let Bernard talk about the unit cost we believe and that we try to answer, there are two other questions regarding the [indiscernible] Base and the Zodiac.

Good evening, Christian. Nothing really new on margins and the cost, we will comment on that in July but so far nothing but we see mix of things, we need to change the assumption that we shared with you in February that has been the impact of both CSM-56 and LEAP transition on our proportion, I just referring it income would be in the range of $300 million to $350 million negative. So far we have I think a good visibility on LEAP-1A and it goes as we plan, we are at the very beginning of the LEAP-1B but what we can see is fully consistent with the initial guidance. So, sorry for that, I know it's not much more than what we said in February but we will update you in July. But again we are in track.

Okay, thank you.

Christian, regarding the value base of Zodiac as you know we are [indiscernible] ach type of this engine and I think we did very well by taking this extra cost during the development and this industrialization to support the production [indiscernible] it helps us a lot, we have as I said last time we were, we haven't [indiscernible] Bernard, it is not something they choose but all together we deliver, we are on track and we continue that to increase our production rate. As of today on average we supply something in the range of 6 LEAP 18 every week to of those and our supply chain is perfectly in line with this requirement from LEAP-1B we are again as we said in the early stage of production that we should in the next coming days achieve engines per months and from there are we like to, to go of course until the end of the year. But kind as the supply base we are, even if we have sometimes some problems is able to that to, let us maintain this production on top. And I said half top four week.

No, top of month.

Top per week.

I'm sorry, I made a mistake we are will going total week, six per week for there is total week so far I mention so, yes its working, it's not at everyday but its working and we are in line to continue to grow this production rate. The last question you had was on the timing for Zodiac we are not in rush when we already, when we are all the data we need which come back to the market and we will update you on our decision.

Okay, thank you very much gentlemen.

Next is from Robert Stallard from Vertical Research. Sir, please go ahead.

Thanks very much. Good afternoon. My first question is that actually on the LEAP engine and your partner CFM/GE is guiding into 450 to 500 engine deliveries this year, you're talking about 500. I was wondering if you could reconcile the difference there and whether they are indicating as an issue there.

Well, there is no difference between, between GNS as we gave about the same engine so quantity at the end of the year is going to be exactly the same one between them on what I did last year and I kept as an objective as the guideline I said last year we should gave on 2016 one out with engine and I said this also rough number 500 in 2017, 1200 in 2018, 1800 in 2019 to 2000 in 2020 it's not exactly if you 100, 500, 1200, 1800 and 2000 it's something between 450 and 500 this year is something which is in my opinion closure to 500 and 450 but we are some way in this range and again its bit too early to tell you exactly the quantity we will deliver during 2017 but there is no difference between GNS regarding the quantity, the quantity of engines.

Okay, and then there is -- second question, I wonder if you could give us an update on the development the Silvercrest engine?

Well, on the Silvercrest engine, we are online with the every thing we said last time we discuss this development. We have announced to all the technical problems we are in which development are we remind you to 18 months although I told you that we had about 12 or 13 different problems to solve technically all of them have been solved. We have now an engine which is mostly developed, the certification is still due certification of the engine during the first half of 2018 so and enter into service of this planning 2020. We are deviated, we are not changed anything in this development phase and industry assumed phase, since last time we discussed this project. It depends on it. Thank you.

Okay. Thanks a lot.

The next question is from [indiscernible] from UBS. Madam, please go ahead.

Thank you. Good evening, gentlemen, I've got two questions, if I may. The first one would be still referring to the aftermarket which has been very, very strong in Q1 and probably slightly better than what you have anticipated and if we take your guidance and which when I understand over the next nine months what you see. Why would you think that the growth could be lower than what you have in 2016 for the next nine months?

You know, it's something, which is not is not really scientific timing when the airlines dispose their engines and can then formatting then. We cannot be sure that it's going to happen in months in a single month. We have rough idea of quantity of engines, which will have to go formatting them. But the timing could be more at the beginning of the year or middle of the year or after the hot season, the peak season of the airline, so it depends it could be either before or after the peak season, so globally we think again as I said a bit earlier that we are on the right track that the quantity should be this we are anticipating it is good, maybe we will do a bit better, but again it is too early today to confirm or to commit off something slightly different from what we said in our annual guidance. But again, the beginning of the year is very good that it's difficult to say if it is an additional quantity of engines or just a shift from the second and the third quarter to the first quarter because the airlines have decided to do that.

Okay. And you did say just to be correct, you did say that the quality of the services or the scopes were relatively better?

So far we are confident in the increase of quantity of services, we have forecasted for 2017. Yes, we believe we are in line with that.

And the scope is stable.

And the scope air show visit is stable, there is no radiation or no reduction in scope of services compared to what we have seen over the last couple of years.

Okay. Thank you. And my second question would be actually related to try and understand on the A320ceo trust services. The unit that you seem to have delivered, if you compare the numbers in Q1 '16 and then Q1 '17 haven't really gone down a lot; it's only a 9% decline. So how do we reconcile this without a significant engine decline?

It's a quantity re-supply, the [indiscernible] we don't supply that directly to others. Our customer is United Technology. So we receive orders from [indiscernible] there are orders, which may go directly the line of production. Maybe I don't know this [indiscernible] there are some for the after-market. Again, our customer is [indiscernible] and we deliver directly to [indiscernible].

Thank you very much.

The next question is from Ben Heelan from Bank of America Merrill Lynch. Sir, please go ahead.

Hi, everyone. Yes. Thank you for the questions. I just wanted to combine GE highlighted on that conference call for the first time they are facing a receivables collection to lay in the aviation business that's related to five airlines. I just wanted to know if you guys see anything similar to this. And if so, what explains it and then I guess a second question is on LEAP performance seems to be quite positive. I'm interested an understanding from your perspective at what point the slight hours the metric would you determine that the performance of the engine from a design perspective has been meaningful de-risked? Thank you.

On receivables, we haven't seen debt, so maybe we will come back to you on that but nothing especial is mentioned here.

Don't forget that GE as a scope, which is different from ours with airlines and we don't know what kind of relationship in terms of contract they have. So they are large engines or small engines, we are just on with CFM a partner of GE and we have not seen anything on CFM, which is in line with the statement that you just mentioned from GE. Regarding the LEAP performance, and again we referred today to the LEAP-1A, which is already in service. If you look at what the airlines comment on the performance of the engine, they are extremely happy and if you look at for example PEGASIS, which was the first one to EUs this new engine. This claim and this [indiscernible] so we have EU that the engine over performs the objective and the commitment, which we have made by the engine manufacturer. So we are pleased with that and again based on our design we think that we are at the objective now the next one to enter to service is it is boring but we are also extremely confident for the performance of this engine on LEAP for the 737MAX.

Philip, thank you.

The next question is from Rami Myerson from Investec. Sir, please go ahead.

Good evening, gentlemen. I have two questions for me, please. On Defense, I think good organic growth in Q1. Is that, something you expect to sustain through the year? And what -- is that coming from domestic? Or is that export order driven?

Yes, Rami. We expect this organic growth to continue for the rest of the year, it's coming from both export and domestic demand.

Thank you. And second question on the Boeing middle of the market 797 [Ph] aircraft is being increased speculation on that particular program. I'm just curious to know if you have received an RFI from Boeing on the program. And just to understand, if the LEAP of the propulsion required is under 50,000 pounds trust, if the LEAP is verification that you would use for that aircraft?

Regarding this new project, of course we are extremely interested by the program and the future of this program. We are in discussions with Boeing and according to the data we have; we believe that this plane is of course Boeing besides to launch it. We'll I think [indiscernible] engines with propulsion of less than 50,000 pounds. So I remind you that we are with JV, with general electric [Ph] or CFM, which -- it is a JV for all the engines with power between EUR 18,000 and EUR 50,000 pounds of trust. We believe that again if Boeing decides to launch [indiscernible] you call it to middle of the market, sometimes I hear also [indiscernible] from as a name for this airplane. We believe that based on the spec we are seeing this aircraft, we need to be powered by something which should be in the range of EUR 40,000 to EUR 50,000 so less than EUR 50,000 and within the JV we have with [indiscernible], but it will not be a LEAP, it will be a [indiscernible] engine. There is a LEAP as not today is a trust required for such a power.

Okay. Thank you very much.

The next question is from Christophe Menard from Kepler Cheuvreux. Sir, please go ahead.

Yes, good evening. I have two questions. The first one is on the commercial momentum, you are seeing on LEAP and CFM56, I mean considering I would say the difficulties of your - of the competing engine would you say that you're seeing more success or less pricing pressure on your offering to airlines, so I mean yes clearly question is on pricing pressure, if you have less of it and the second question is on the you mentioned in the press release that you sold some A320 new spare and nacelles, in Q1, is this an underlying trend that we should expect in those upcoming quarters and is it something that is going to continue to grow given the increase in A320 new delivery.

The first question is difficult to answer because it is little black or white, we see in terms of commercial momentum, real interest of many airlines our LEAP engine does it mean that we are [indiscernible] and we can market at this on price then the market is requiring, I would like to say yes but unfortunately we are in a market which is competitive and even if we believe we can charge for premium base on our current performance, I don't think we can go other than that. So yes we try to guide premium always done because we believe we have an extremely reliable product and good product that its difficult for me to tell you, if we can go further than that and we are in discussions, commercial discussions with some airlines and I hope you understand that we cannot really comment to let our pricing negotiations and pricing discussion with our customers. Regarding the nacelle, yes, you know we are taking about initial positioning all the airlines which are taking now new aircraft with new nacelle. They need to buy some spare in order to get ready just in case and the initial positioning we are seeing today in our nacelle business is it was a very good, very good news for us we were expecting this to come but later than what we are seeing so, the I believe that we are being profitable, they're not select at all to buy and even to bit early top news that we need at the stage and we are taking advantage of that right now with our nacelle business.

Thank you very much.

We're having no other question.

So, thank you very much. I wish everybody a very good evening and thank you for listening to us.

Ladies and gentlemen this concludes the conference call. Thank you all for your participation and you will now disconnect.