SAFRAN Stock

Welcome to the Safran Half Year 2026 Results. At this time, I would like to turn the conference over to your host, Mr. Olivier Andries, Safran's CFO; and Pascal Bantegnie, Group CFO. Mr. Andries, please go ahead.

Good morning, everyone, and thank you for being with us today. So Q2 continued on the strong trends observed in Q1, resulting in an exceptional first half, marked by a stellar demand in the civil engine aftermarket, a strong ramp-up in LEAP and M88 engine deliveries and record financial performance. The Middle East conflict barely impacted our performance. Civil aftermarket activities remaining well above our pre-conflict forecast. Spare part sales for civil engines increased by 28% in dollar value. And civil engine services also grew by more than 40%. All this despite the geopolitical context in the Middle East.

CFM56 continued to drive spare parts performance with the fleet benefiting from a low level of retirement, combined with a very strong demand for aftermarket. LEAP is also expanding with a fast-growing number of shop visits, significant workscope increase and more shop visits being performed by third-party maintenance, repair and overhaul shops. We delivered 1,030 LEAP engines in H1, a 41% increase year-on-year, aligning 4 consecutive quarters with over 500 deliveries. All of this translated into record financial performance.

Revenue reached EUR 17.6 billion, up 20% on an organic basis. Recurring operating income climbed by 29% to EUR 3.2 billion, representing an unprecedented operating margin of 18.4%. Free cash flow was even stronger, up 43% to EUR 2.6 billion. Given this robust performance and the strong visibility in front of us, we are raising our full year guidance. Lastly, disciplined portfolio management remains a priority. We completed the divestment of Safran Passenger Innovation and of our 50% stake in EZ Air, our past joint venture with Embraer. Regarding Aubert & Duval, Airbus and Safran recently completed the acquisition of Tikehau Capital stake, further strengthening our objective to building a more resilient aerospace and defense supply chain.

Turning to Slide 4. Safran is benefiting from strong commercial momentum across its civil businesses. We continue to ramp up our capacity to support growing demand and strengthen the resilience of our industrial footprint. In Mexico, we opened -- end of June, we opened a new LEAP maintenance shop in Querétaro and a new electrical wiring factory in Chihuahua. At Farnborough, LEAP confirmed its position as the engine of choice on narrow-body platforms as illustrated by the signature of an MoU by IndiGo for more than 1,000 LEAP-1A engine, our largest ever engine order to power its A320neo family fleet and support its new MRO facility.

BOC Aviation also placed an order for up to 300 LEAP engines. The new LEAP Premier MRO license with IAG, and CFM, together with a full-fledged LEAP engine shop being developed in Singapore through our joint venture with Singapore Airlines will further expand maintenance capacity and strengthen the global LEAP ecosystem. We are also preparing the future of flight. Electra, a U.S. company selected Safran turbogenerator, Turbogen600 for its EL9 hybrid electric aircraft, a short and takeoff and landing aircraft with an initial order for 250 units.

Turning to Slide 5. RISE technologies are now being matured towards ground and flight test demonstration this decade. Since CFM unveiled RISE in 2021, approximately 500 test campaigns and more than 5,000 endurance and dust cycles have been completed across Open Fan. Compact core and hybrid electric technologies, mobilizing more than 2,000 CFM engineers in both sides of the Atlantic Ocean. The program is moving from concept to reality. The compact core modules, the Open Fan blade and the OGV airfoil have passed preliminary design reviews, enabling the program to enter the detailed design, manufacturing and physical realization phase of the demonstrator, leveraging decades of expertise, including 4 composite fan blades in Safran. Mechanical and material tests are underway on blades and OGV, including impact, ingestion, fatigue, endurance, load, icing and vibration response. Wind tunnel campaigns have also demonstrated aeroacoustic performance above technology maturation objectives.

Durability is being addressed earlier than ever in the new technology development cycle. More than 2,000 dust-ingestion cycles have already been completed on next-generation HPT airfoil in an engine core. A second campaign is now testing RISE HPT technologies in our more product representative LEAP-1B engine to assess their potential benefits for the fleet. On the fan system, the first high-speed low-pressure turbine has been tested for more than 1,000 hours, validating aerodynamic design and aerothermal performance.

The next milestone is the preparation of a full-scale front module test in our new test cell at Villaroche, progressively building towards the low-pressure system, including the reduction gearbox. Finally, on hybrid-electric, Safran has launched the PHILEAS ground test campaign at Istres, a full-scale engine demonstrator with 2 electric machines installed on the high-pressure and low-pressure shafts with a campaign planned for approximately 6 months and nearly 300 hours. We are using our Silvercrest engine for that -- for those tests.

Turning to Slide 6. Defense continues to show a particularly strong momentum. Eurosatory confirmed the depth of demand, which we are converting into major wins and partnerships. We are once again ramping up capacity in critical areas with major investment in hemispherical resonator gyroscope Inertial Navigation in [ Montluçon, ] in positioning navigation and timing equipment and optronics in Germany and optronics and surveillance and recognition system in Dijon, France. Numerous new partnerships were announced recently, supporting our global expansion as more than 80% of our defense electronics backlog is international.

Safran joined Airbus, Destinus, MBDA Deutschland and Thales in signing a letter of intent to establish the Bliksem EXO consortium and develop a sovereign European exo-atmospheric interceptor against medium and intermediate range ballistic missiles. Finally, we are converting this demand into major wins. THUNDART is a key illustration with Safran and MBDA selected to provide France future long-range land strike capability with very strong export potential. We have seen a lot of European countries coming to us since this announcement. We also secured major contracts for JIM Compact, our portable electronics equipment and Skyjacker Advanced, which is our [ anti-UAV ] system. Pascal, the floor is yours.

Thank you, Olivier. Good morning, everyone. Today, I will guide you through the adjusted accounts, and you'll find a reconciliation to the consolidated statements in the appendix. So let's begin with the FX trends, which are highlighted on Slide 8. In the context of the ongoing Middle East crisis and its impact on the macro economy, volatility persisted during the first half with the dollar strengthening against the euro moving from 1.18 to 1.14. Given the level of activity observed in H1 2026, it is likely that we would need to revise upwards the volumes to be hedged for the remainder of the year and for future periods. This does not call into question the hedge risk targets shown in the graph, starting with 1.12 in 2026. Overall, our hedge portfolio continues to serve as a key protection mechanism, providing us with solid visibility on future dollar exposure despite currency volatility.

Now let's turn to revenue and recurring operating income on Slide 9. Revenue reached EUR 17.6 billion in H1, representing a 19% increase on a reported basis and more than 20% organically. The negative currency impact of EUR 742 million reflects an average spot rate of 1.17 compared to 1.09 in H1 2025. This impact was partly offset by the scope effect, which had a positive impact of EUR 550 million, mainly due to the acquisition of Collins actuation and flight control activities and partially offset by the divestment of Safran Passenger Innovations. Recurring operating income rose by 29% to EUR 3.2 billion, significantly outpacing revenue growth. Despite some cost increases in certain materials, partly offset by tariff refunds, the margin improved by 140 basis points, reaching a record 18.4%. The main drivers of this performance were robust revenue growth, the outstanding performance of the civil engine aftermarket, strong defense activities and as usual, our sustained focus on operational excellence across the group.

Moving on to Slide 10, you will find a summary of the income statement. One-off items amounted to minus EUR 177 million, which includes program impairment charges, M&A transaction costs and the outcome of commercial discussions concerning past operations. Net financial expense was EUR 123 million. This includes a positive EUR 57 million of net financial interest, reflecting our positive net cash position as well as EUR 188 million foreign exchange loss, which includes the impact of reassessing U.S. dollar provisions. The reported tax rate was 33%, which reflects a EUR 322 million impact from the French corporate surtax. Without this surtax, the effective tax rate would have been 22%. With the increased EBIT guidance, you should now expect nearly EUR 500 million impact for the full year, meaning an additional EUR 180 million in the second half from the surtax. Overall, net income attributable to the parent reached EUR 1.9 billion, up 21% year-over-year, resulting in earnings per share of EUR 4.63.

Turning now to Propulsion on Slide 11. Revenue reached EUR 9.2 billion in H1, up 28% organically, driven by the strong momentum in both civil and military engines. In civil engines, aftermarket growth exceeded our expectation. Spare part sales grew by 28% in dollars, mainly supported by a continued favorable workscope mix on the CFM56, something we have seen since mid-2025 as well as a higher contribution from LEAP aftermarket with an increase in external shop visits. Pricing also supported growth on both CFM56 and LEAP. In addition, civil engine services were particularly strong, up 40% in dollars, led by LEAP RPFH contracts. It's important to note that the trigger to recognize LEAP-1B RPFH profit has not yet been reached. The introduction of the maverick blade is planned for later this year or early next year.

On OE, we delivered 1,030 LEAP engines in the first half, up 41% year-over-year, including 24% growth in the second quarter. This marks the fourth consecutive quarters with over 500 deliveries, and you can expect further sequential growth in the second half. Military engines also contributed positively. As announced, Rafale production is ramping up from 2 aircraft per month in 2025 to 4 per month by 2029, resulting in M88 engine deliveries more than tripling in the first half. Revenue growth also benefited from a favorable customer mix and a solid level of services. Helicopter turbines benefited mainly from the aftermarket activity, while OE was slightly down due to ongoing supply chain challenges. Missile propulsion systems continue to grow, driven by increased deliveries. By the end of this year, we will have tripled our missile turbojet capacity compared to 2022.

Recurring operating income reached EUR 2.3 billion, up almost EUR 500 million versus H1 2025. The margin increased by 120 basis points to 24.5% of sales, a record, exceeding our annual guidance of 22% to 24%, mainly thanks to the outstanding performance of the civil engine aftermarket and continued strength in military engine deliveries.

Moving on to Equipment & Defense, Slide 12. Revenue reached EUR 6.9 billion in H1 2026, up 14% organically. The scope effect primarily reflects the full integration of the Flight Control and Actuation business. Organic growth also takes into account the transfer of Safran Ventilation Systems from Aircraft Interiors to Equipment & Defense. Without this transfer, organic growth would have been 12.4%. On the equipment side, we observed higher OE volumes across the board with particularly strong performance in nacelles for the A320neo. Electrical systems also delivered solid results, driven by strong demand for programs such as the 737 MAX, A320neo and the A350. Defense activities made a solid contribution as well, especially in inertial navigation systems, which recorded strong double-digit growth, along with robust performance in electronics and the Hammer guided bomb.

Aftermarket services grew across all segments with especially strong growth in electrical systems, notably on the A380 and in nacelles for the A320neo. Recurring operating income reached EUR 907 million, up EUR 204 million year-over-year. The margin improved by 60 basis points to 13.1% or by 110 basis points to 13.6%, excluding the contribution from the Actuation business. All business units contributed to the strong overall performance, supported by higher volumes, improved pricing and continued focus on operations.

Turning now to Slide 13 on Aircraft Interiors. Revenue reached EUR 1.5 billion, up 6.6% organically. When you exclude the transfer of Safran Ventilation Systems to Equipment & Defense, organic growth would have been 12.2%. In Cabin, aftermarket growth was led by spare parts, notably on the A350, A220 with good dynamics in all geographies. OE volumes also increased, driven by A350 lavatories as well as 737 and A320 galleys.

In Seats, business class seats deliveries increased by 4% with a 21% catch-up in the second quarter. OE performance was also supported by a favorable pricing effect in line with the right pricing for value strategy that we presented at CMD. Aftermarket activities delivered good growth in both spare parts and services. Recurring operating income doubled to EUR 54 million, lifting the margin by 200 basis points to 3.7% despite the dilutive impact of the Safran Passenger Innovation divestment and the transfer of Safran Ventilation Systems. This margin expansion was driven by pricing on cabin and business classes and volume, spare parts. This performance confirms that Aircraft Interiors remains firmly on track with its road map for continuous margin improvement.

Turning now to Slide 14. Free cash flow generation increased by EUR 800 million to EUR 2.6 billion, up 43% year-over-year, resulting in a very strong EBIT to cash conversion ratio of over 80%. This excellent performance was driven by a 24% increase in EBITDA as well as the positive changes in working cap. Indeed, inventory growth was more than offset by increases in advanced payments and deferred income, which benefited from defense-related advanced payments and deferred income related to the RPFH contracts on LEAP. It is worth highlighting that inventories grew at a slower rate than sales, allowing us to reduce our inventory DSO by 5 days. Income tax payments remained broadly stable as the cash impact of the French surtax will take place in the second half of the year. We continue to invest significantly to support our growth. Tangible CapEx reached EUR 750 million, up 15%, with spending focused on capacity expansion across the group, particularly for LEAP OE, MRO activities and defense electronics.

Looking at Slide 15, Safran's net cash position remained almost stable at EUR 1.7 billion. 90% of the cash generated in the first half was used to pay the dividend of EUR 3.35 per share, totaling EUR 1.4 billion and to finance the share buyback program. In the first 6 months, we bought back 2.6 million shares for cancellation purpose. And looking specifically at the share buyback program, between Jan and July 2026, we repurchased around 2.8 million shares for cancellation. It's about 0.7% of the share capital for a total amount of EUR 875 million. These shares are scheduled to be canceled before year-end, and we also plan to launch an additional tranche in the coming weeks, which will be executed before the end of the year. M&A activity resulted in a limited net inflow of EUR 33 million, mainly reflecting the divestment of SPI, partly offset by smaller acquisitions, including Syntony, in inertial navigation. Finally, reflecting Safran's strong financial discipline, Standard & Poor's upgraded the outlook on Safran's A- credit rating to positive in July 2026. With that, I'll hand it over back to you, Olivier.

Thank you, Pascal. I am now on Slide 17. Building on our strong first half performance and sustained momentum across both Civil Aerospace and Defense, we are raising our 2026 outlook. Revenue should increase in mid-teens, above EUR 36 billion. Recurring operating income guidance is improved by EUR 300 million at midpoint to reflect better performance in civil aftermarket. Free cash flow guidance is improved by EUR 300 million at midpoint despite an increase of the estimated impact of the French corporate surtax. The revenue growth outlook for our 2 key indicators have been raised. Spare parts and services revenues are expected to be up in the mid-20s, while LEAP deliveries are now expected to be up in the high teens. Thank you, and we are ready now to answer to your questions.

[Operator Instructions] We are now going to proceed with our first question. And the questions come from the line of Olivier Brochet from Rothschild & Co.

I would have 2. First of all, on the margin in propulsion at 24.5%, which is quite exceptional. You have an increase in the LEAP deliveries and in services sales, which I would assume are dilutive. Could you share some color on the drivers for that performance in H1? And the second question is on the one-offs. Could you just give us a little bit more detail on what is within the propulsion number of minus EUR 134 million? And how much of that is cash rather than P&L?

Olivier, indeed, we recorded a stellar performance in margin in propulsion with a margin of 24.5%, exceeding our annual guidance of 22% to 24%, which was clearly driven by spare parts, notably on CFM56, but as well on LEAP. We benefited from the pricing effect on CFM56 that we had on 1st of August last year, but mainly from a very favorable workscope mix effect, meaning that airlines will spend a lot every time they come to maintain spare engines.

And the second driver for this strong performance was the volume of spare engines that we delivered in H1. It's about 60% of the annual volume we expect to deliver spare engines for the full year. And I would even add a third item, which is a very good performance we enjoyed in the military engines, notably on the M88. As we said, we tripled the volume of engines we have delivered in H1 '26 compared to last year. Now looking to the one-off in propulsion. It's what we say on Slide 10. It's about the impact of the conclusion of commercial discussions that we had for long concerning past operations with some partners.

And is it cash or not cash?

The cash would be -- well, part of the cash will be at the end of this year and next year.

We are now going to proceed with our next question and the questions come from the line of Christophe Menard from Deutsche Bank.

I had 2. So for the full year, could you refresh a little bit the divisional EBIT margin guidance? I think you were last time mentioning Equipment & Defense to be slightly above 12.7%, but it seems that for the full year, it will be better. So that's the first question. And still in terms of the Equipment & Defense margin, which came out very strong in H1. You mentioned 110 basis point improvement linked to the structural business. What share of this is linked to defense and what is linked to electrical and nacelle in terms of margin improvement?

Christophe, so we are raising our full year outlook. So you -- one can expect that our margin should be slightly above what we communicated so far. Starting with propulsion, as we recorded a 24.5% operating margin in H1, I would expect the full year margin to be at least at the upper end of the 22%, 24% guidance, meaning around 24%, okay, which would be a point of improvement compared to what we had in 2025.

In Equipment & Defense, we have always called for at least 50 basis points margin improvement including the Actuation business. Excluding the Actuation business, as we communicated back at the Capital Market Day in 2021, our target is to increase by at least 1 point the margin in that branch to reach 15% at the end of the day. Here again, as we had a strong margin in H1, I would expect to beat the 50 basis point margin improvement for the full year. And then on Aircraft Interiors, there have been a lot of changes in scope with the divestment of SPI with the transfer of Safran Ventilation System. But still, I would say, at least 1 point of improvement. And then on your specific question around Equipment & Defense. Defense is clearly a good contributor to the margin improvement. But as you rightly say, the nacelle business also enjoyed a pretty good growth momentum in profit. So I would say they will benefit at par to the margin improvement this year.

We are now going to proceed with our next question. And the questions come from the line of Ross Law from Morgan Stanley.

So the first is on the guidance upgrade in services to mid-20s. It implies a pretty aggressive deceleration in the second half, something in the sort of 10% low double-digit range. Can you just walk us through the key drivers of that? And then secondly, Airbus has indicated quite publicly that it wants to recalibrate the economic relationship between OE and aftermarket on the next-generation single aisle. I would be interested to hear how Safran thinks about this and whether you and your partner, GE would be willing to give up future aftermarket profits in return for better OE economics?

Ross, Olivier speaking. On the spare parts...

Services...

It was services, yes. Okay. It was services. Okay. Well, the main driver for the services growth is really the LEAP shop visit. The shop visit volume has increased by more than 30% compared to last year. This is basically this is just the consequence of the fact that the LEAP in service is simply growing. And also the workscope continues to increase on the LEAP as well. So this is the main driver for the services side.

As Pascal has mentioned on the spare part side, the main driver for the growth has been the workscope. In fact, we have seen a higher proportion of heavy workscope, basically continuing the trend that has started in H2 2025. We've not been surprised by the volume of shop visits. It was as expected. So we confirm that we are going to be around 2,400 CFM56 shop visits. So no surprise on that. Pricing was obviously anticipated. So the main surprise, if you wish, which was well ahead of our expectation was about the workscope. So that's the main drivers.

If I may just add, Olivier. As you know, there is no impact on profits because whatever the revenues are, you know that from an accounting perspective, we have defined our strategy to release on the services, the portion of RPFH profit we want. So whatever the growth rate in H2, there will be no consequence on the EBIT.

Okay. So we have listened to the, let's say, Airbus communication as you did as well with an appetite basically to discuss the respective business model. As you know, on the engine side, when we invest on a brand-new engine development, we have to be quite patient to get our return because not only we spend a lot of money for the development of the engine, the industrialization, the ramp-up, getting into service and all that. On top of that, for years and years, when we deliver engines to the airframers, we do that at a loss. And we only make profit at the time when shop visits come up. So we have to wait quite a long time. So any potential discussion on business model has to be holistic, taking into account the OE side and the aftermarket side.

We are now going to proceed with our next question. And the questions come from the line of Sam Burgess from Goldman Sachs.

Maybe I'll just follow up on those last 2 questions with similar themes. So just on the workscope, looking forward, I mean, what do you see in terms of the evolution of this workscope as we move into H2 and then even beyond that into '27? Does this continue to be a tailwind and supportive? Or does it start to reverse at some stage? And then secondly, on the engine deliveries, I mean, they've been very, very strong in H1. Is there a possibility that we could see you maybe overdelivering to Airbus, particularly as we look towards '27, and we know that Airbus have been slightly out of pocket from the other supplier. Is there a possibility you could help them out?

Indeed, on workscope, in fact, interestingly, the workscope in 2025 has been mainly driven by material availability rather than demand. And the material availability does improve. And so basically, we are in a tailwind situation. And so we are indeed confident that the trend that we see now with, let's say, a significant proportion of shop visits with a heavy workscope is going to continue for at least the 2 next years in 2027 and 2028. This tailwind will go on for at least the next 2 years.

On engine deliveries, we have revised up our guidance simply because we have gained confidence in our ability to deliver. We -- basically, with that, we are going to meet both Airbus and Boeing expectations as well as to deliver enough spare engines to the airlines in order to ensure that there's not going to be any aircraft on ground, which is a strong focus of ours, nothing is more frustrating for an airline that having bought an asset and having this asset grounded simply because there is an engine issue. So yes, in 2026, we are going to meet Airbus expectation. We are going to meet Boeing expectation. We are going to deliver what the market needs -- the airline market needs in terms of spare engines. And I can say that we are confident also in 2027 to meet both Airbus and Boeing expectation. Do we have enough, let's say, to offset some of the other guy, if I may say, lack of deliveries. This is -- I mean, if we can help in that respect, we would, obviously. But again, our first priority and our first commitment is to deliver on our promises, both Airbus and Boeing and the airlines.

And our next questions come from the line of Ian Douglas-Pennant from UBS.

Yes, it's Ian with UBS. I'm sorry to ask another question on workscope. But can you give us any metrics or anything -- any just more information or color to allow us to share your confidence that workscope will continue to be strong for the next couple of years and especially that the increase in material supply won't impact your ability to maintain price from here? I'll just leave it there.

Okay. Ian, so clearly, when we are discussing CFM56 aftermarket, demand exceeds supply today. So we continue to see substantial MRO capacity constraints, which is driving longer lead times and elevated workscope today. And the airlines, they learn from past crisis and they are looking to manage potential MRO capacity and supply chain risk and they come to -- when they come to maintenance, they tend to spend more than less. And that trend should continue not only in H2 this year, but as Olivier said, in '27 and '28, meaning that when you are discussing the revenue on CFM56 aftermarket, you need to consider, I would say, a flattish volume in number of shop visits, pricing power. This year, by the way, we will be in the mid- to high single-digit range, plus an increase in workscope.

Another way to look at it, following the COVID crisis, we have seen a huge ramp-up in volume in terms of number of shop visits. And now it seems that we are seeing the, I would say, the other way of the green time effect that we had suffered from during the COVID time and airlines are spending more in order to get ready when the Middle East crisis starts and traffic resumes. So they don't want to lose time and idle their fleets. They want to take benefits of this period to maintain their engines and get ready when the market starts again very strongly.

And Ian, I would add that we see a very significant proportion of shop visit where basically the full scope of HPT blades and LLPs for the core, but also for the LP sections are replaced. So it's really a full scope of shop visit.

We are now going to proceed with our next question. And the questions come from the line of Milene Kerner from Barclays.

Congrats on a very strong set of results. So I have 2 questions. One, to follow up on Olivier's question. Your propulsion margin reached 24.5%. As you said, Pascal, that is above your target range of 22%, 24%. How should we think about the margin trajectory from here as workscope will remain elevated on CFM56? You're going to start booking the LEAP-B Maverick and you're going to have more LEAP shop visits that will be performed by third party? And then my second question is that you're now guiding to around EUR 6.5 billion recurring operating income. The updated 2028 target of EUR 7 billion to EUR 7.5 billion appears relatively close. Are there headwinds beyond this year that could moderate the earnings growth?

Milene, on propulsion margin, as I said, we should be at least at the upper end of the 24%, 24% margin. This year, we could definitely slightly exceed the 24% mark. Going forward, a bit early to say, but we continue to see a lot of tailwinds, notably on CFM56 as well as the LEAP spare parts. As you rightly said, we will start to recognize anytime soon LEAP-1B or RPFH margin despite the fact it's lower than what we had to recognize on LEAP-1A. So all that concur to, I would say, upper range of 22%, 24% going forward. And as you rightly said as well, when we look to our 2028 guidance, we may have to revisit that once again, given the strong performance we have and the raising guidance in 2026.

We are now going to proceed with our next question. And the questions come from the line of Benjamin Heelan from Bank of America.

I hope you're well. So the first question I had was on the LEAP OE profitability. Could you give us an update on where you are on that journey to the breakeven point? And you mentioned that you delivered 60% of the spares you expect for the full year in H1. Can you give us a kind of high-level view on that spare engine ratio that you're expecting for this year? That would be the first question. And then the second question is coming back on this engine versus OE economics. I guess the question is more why would you guys entertain that discussion? What does Airbus -- what would an OE -- take it away from Airbus, what would the OEs really bring to the table other than program participation. They don't have servicing IP. They don't have engineering IP on the engine side. So those would be the 2 questions.

Ben, so on LEAP OE, as we said many times, we already turned profitable when you combine installed engines and spare engines since maybe 3 years now. Now if you look specifically at installed engines, we continue to have a slight EBIT negative every time we are selling a new engine, and we are definitely strongly positive when we sell spare engines. But all combined, it is already profitable. In H1, as I said, we delivered 60% of the total expected volumes of spare engines. I would say that the ratio of spare engines with respect to the total of LEAP engines was in the low double digits. And looking to H2, there will be a deceleration to, I would say, a ratio of 10% to 12%, which basically will be the norm going forward.

On the other question, of course, the discussion is not going to be the same depending on which configuration we're in. If indeed, we are in a single source discussion, then topics could be on the table that would not be on the table if we are in a typical dual source situation. At the end of the day, we will make sure that in terms of internal rate of return, our ambition are going to stay identical and remain the same before we launch a new development. We have a very strict discipline, and we want to make sure that our internal rate of return is going to be the same. As I said before, in our current business model, we have to be more patient simply because as long as there is no shop visit basically and because we deliver the engines at the [ Safran ] at a loss, basically, we have to be patient. So that's the point. And it's all about what kind of discussion could happen in a sort of single source situation.

And if you remember well, we introduced the CFM56 second-gen engines back in the early '90s, and we only enjoy from the peak aftermarket revenue and profit today in 2026. So it's a long, long, long cycle for engine makers.

We are now going to proceed with our next question. And the questions come from the line of Robert Stallard from Vertical Research.

A couple of non-engine questions for you. First of all, in equipment, Airbus said the other day that they're looking at significantly increasing the Airbus A350 production. I was wondering what your capacity is in equipment to satisfy any further rate increase there? And then secondly, in Interiors, you noted a recovery in seat deliveries in Q2. Have we turned the corner in this certification logjam for seats?

Robert, yes, the ramp-up objectives and the ramp-up plan of both Airbus and Boeing are very good news for us for our Equipment division because in our Equipment division, we are more exposed to widebodies than on our Engine division. And so that will -- that's also part of, let's say, the pathway to a mid-teen profitability that we are aiming at by 2028. So indeed, this is very good news. Just remind you on A350, 787, we are on board with the landing gear, a lot of electrical equipment as well, wiring. So all that is good news.

On Interiors, we continue to improve our pricing on seats. As we've already mentioned to you at our last Capital Market Day, there's significant demand. Demand on seats is indeed significantly above supply globally. That's just a combination of a demand for retrofit program and demand for line feed program. So indeed, we can get more value for our seats. Now we've not yet turned the corner. It's an industry issue that is now well understood and identified by the airframers and by the airworthiness authorities. And by the way, there's going to be significant discussion in H2 on that because indeed, the airworthiness authorities have elevated their interpretation of preexisting rules in a view that is creating roadblocks for the certification of seats and therefore, for deliveries of seats. Again, this is an industry issue. It's not a Safran issue. It's an industry issue that will need to be tackled. I hope we will be able to turn the corner by the end of this year. But again, it will have to be a collective and objective discussion between seat manufacturers, airframers and airworthiness authorities.

Last year, we turned EBIT positive on seats, but the challenge this year is to turn cash positive. In H1, it was slightly negative. So we expect to generate some cash in H2 in order to be a balance for the full year.

We are now going to proceed with our next question. And the questions come from the line of Ken Herbert from RBC Capital Markets.

Two questions, if I could. Can you quantify or be more specific on how much advanced payments, I'm guessing on the defense side benefited the first half free cash flow? And second, with the very strong balance sheet, is there any update you can provide on either how we think about buyback over the next couple of years or maybe any incremental interest in scopes or further mergers and acquisitions as you think about capital allocation?

Okay. On your second question, we definitely enjoy a strong balance sheet. On share buyback, we have a program into force of EUR 5 billion. We have executed nearly 50% of that right now. So we'll continue, as I say, we'll launch a new tranche, I guess, early September to be executed by the end of this year. So we are on plan to execute our share buyback program. Until we fully execute that program, we don't see any need to announce any further share buybacks at this point in time. Regarding M&A, as Olivier said many times, we clearly are looking at opportunities, notably on the defense segment in Europe. You may have seen that we have missed one of them very recently. So you can see that we continue to be active.

And disciplined.

And disciplined absolutely.

And disciplined.

Now looking at advanced payments and deferred income. Deferred income has continued to rise in H1. I won't quote the specific numbers, but it's all driven by the LEAP RPFH contracts. As you know, we're getting paid by flying hours. Advance of payments, we have seen a slight increase in H1, not much. So you cannot consider that the EUR 2.6 billion free cash flow performance was driven by advances. As I already said many times in the past, we have not factored in any advance payments, which could come before year-end from the current contract into discussion with the Indian Air Force for 114 Rafales. So this is not in our guidance, and this could come as an upside if we do receive any payments before year-end.

We are now going to proceed with our next question. And the questions come from the line of David Perry from JPMorgan.

Three, if I may, please. First one, just on -- can you hear me?

Yes, we can hear you...

Okay. So I have 2 questions. On the workscope issue, we often think of it as discretionary airline decisions or as you said, availability of material. I was just wondering whether mix was also a factor. Is it the fact that you're seeing a lot more second shop visits that are just coming in at a higher price? Is that a factor or not? And the second one, just following up on the M&A question just before. You bid for Exail and obviously, Thales has offered more. But I'm just wondering, are you looking more proactively now at defense M&A?

David, on workscope, of course, at the end of the day, it's always an airline decision. Workscope is an airline decision. I mean, to the exception of, let's say, what has to be done if an LLP part has come to the end of its life potential, it has to be replaced. But again, it's -- let's say, beyond what is absolutely compulsory and which is a driver for the shop visit because there is always a driver for shop visit. It's an airline decision to extend or not the workscope of the shop visit. And again, in the past, especially up to mid-2025, it was constrained by material availability, which is not the case anymore. And so we have seen let's say, a tailwind popping up in that respect. And as I said, it's going to continue for the next 2 years. We are very, very confident on that.

On M&A, yes, we've missed Exail. That was a nice to have for us. That's why we decided to remain disciplined. So that's what happened. We are going to continue actively to look at opportunities in that respect. again, opportunities that are consistent with our core objectives and our core portfolio of activities. So on defense electronics, we want to stay platform agnostic on one side. And on the other side, we are pretty active in what we call ISTAR. ISTAR means intelligence, surveillance, tracking, acquisition of target and recognition. That's basically our field of activities. And so as long as it is, let's say, consistent with this portfolio of activities, and as long as it makes sense as well financially, I mean, we would move on an opportunistic basis.

And I would add that valuation of defense assets are pretty rich today. So as Olivier said, we need to remain disciplined from a financial perspective. It has to fit our DNA from a technology perspective, obviously. But we need to remain disciplined. There is a kind of bubble of valuation on defense assets today. So we need to remain disciplined on that.

And our priority is Europe.

We are now going to proceed with our next question. And the questions come from the line of Sebastian Growe from BNP Paribas.

Two questions then, one on Equipment & Defense. And your earlier comments suggested that demand growth continues to exceed mid-teens revenue growth in the business that we have seen in the first half. So could you please share the H1 book-to-bill ratio with us in the segment? I think you said earlier that in '25, you had 1.6x of book-to-bill. And how should one think of the order book conversion to sales growth going forward?

The second question I have is then on free cash flow. The EUR 300 million higher guidance does reflect a 100% drop-through from the raised adjusted EBIT target. And Pascal, you mentioned the reduction in inventory days, among others, having supported the strong free cash flow generation in the first half. So my question is how sustainable might this working capital improvement be? And do you feel now more confident with regard to your midterm conversion target of 70%?

I'll take the first one. On the book-to-bill, yes, on Defense Electronics, we've enjoyed 1.6 book-to-bill last year. Our, let's say, basic objective is to be this year above 1.3. I hope we will be better than that, but this is our, let's say, minimum goal is to be at 1.3. This is what we need to feed the growth of, let's say, 20% or more year-on-year between now and 2030.

Sebastian, on your free cash flow question, we have a target to improve by almost 10 days our inventory DSOs this year. As I said, at the end of June, we improved by 5 days. So there's still some work to do on that side. But any increase in value in euro terms of inventories would be more than offset by the level of advance payments or deferred income we will receive in the second half. So I would expect the working capital change to remain slightly positive. CapEx will continue to increase given all the projects that Olivier has discussed in his introduction. So all in all, the free cash flow increase reflects good growth in EBITDA, increasing CapEx and the positive change in working cap. And as you know, on the taxes, it will be a significant increase from last year.

We will now take one last question.

One more, we can take one more, if any.

Okay. So the next questions come from the line of Herve Drouet from CIC CIB.

Two as well on my side. The first one on pricing and bargaining power. I mean, obviously, I mean, you mentioned the demand in all segments are overwhelmingly above supply. I was wondering, looking in next year, do you believe the pricing dynamics you currently enjoyed could be maintained or even increased? I mean it looks like some motorists are increasing their pricing even on OEM quite significantly. So I wanted to have your view on that on OEM, but also on services and spares. And the second one is on the profit on LEAP for flight per hour contract. Do you believe starting from next year, you will be able to release some profit on those contracts in your financials?

The dynamic is different depending on the customers' categories, if you wish. On the equipment side, we have program life agreement with the airframers. And so the pricing is defined by those long-term agreements, program life, where we have escalation formulas. So this is quite ballistic, if you wish. And we don't have much room to maneuver on those program life contracts that we have with the airframers. We have more, let's say, flexibility and room for maneuver on the services side -- on one side. And when we have a direct relationship with the airlines, which is what we call the BFE business model on Aircraft Interiors. BFE means buyer furnished equipment. This is basically what reflects the equipment for which our customer is not the airframer, but directly the airline. So the pricing dynamic, we believe will mostly remain the same on the aftermarket side.

We want those to be, let's say, moderate because, again, we don't want to have an abusive posture at all. We just -- every price increase has to be explained. And the fact is that because of supply chain constraints, some of our suppliers may be in strong position and impose as well some price increase. So we have this on the cost side as well. And so we need to reflect that. And so any price increase has to be explained and understood. But I would say the pricing dynamics is going to stay more or less the same in the coming years on the aftermarket side. And I would say the same on the Aircraft Interior side for the -- what we call the [ BSE ] business, which is mainly the seat business.

Herve, on your second question about LEAP RPFH margin recognition, the triggering event to recognize the profits is the introduction of the Maverick HPT blade. So regarding LEAP-1A, this occurred in late 2024. This is why in 2025, we started to recognize profit on LEAP-1A RPFH contracts, not only for the year 2025, but also for the past margins, which was kept on the balance sheet at that time. Regarding the LEAP-1B, you know that the Maverick Blade, HPT blade is now certified by GE. We are waiting for the introduction into service of that blade. Should that occur late this year, we'll start to recognize in H2 some profits. Should that occur early '27, we'll start to recognize profits for the LEAP-1B RPFH contracts in 2027. So it's pretty simple. It only depends on the date of introduction of the HPT blade from GE. With that, we'll conclude this session. Have a good summer break, and thank you for your attention.

Thank you.

This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you. Have a good rest of your day.

Welcome to the Safran First Quarter 2026 Revenue. At this time, I would like to turn the conference over to your host, Olivier Andries, Safran CEO, and Pascal Bantegnie, Group CFO. Mr. Andries, please go ahead.

Thank you. Good morning, everyone, and thank you for joining us. We had a very strong first quarter with revenue reaching EUR 8.6 billion, up 23% organically. We continue to benefit from a solid momentum in both aerospace and defense with little to no impact from the Middle East conflict so far. Once again, our main growth driver is aftermarket. We saw vigorous demand across the board, especially for commercial engines and nacelle.

Sales of spare parts for civil aircraft engines were up 29%, mostly thanks to the CFM56. Services for civil aircraft engines increased by 43% with LEAP rate per flight hour contracts leading the way. At the same time, building on our excellent industrial performance in the second half of 2025, we continued the LEAP ramp-up with more than 500 deliveries this quarter, up 63% year-on-year and marking the third consecutive quarter with deliveries above this level. Overall, the strength of our Q1 performance reinforces our confidence in reaching the high end of our full year 2026 guidance.

That said, we remain cautious for the coming months given the uncertainty around the scale, duration and potential impact of the Middle East conflict, notably on air traffic. A few words on our portfolio management. In January, we completed the divestment of Safran Passenger Innovations. And more recently, we announced the acquisition of a partner Syntony, the leader in resilient navigation technologies for complex and denied environments.

Turning to Slide 4. We continue to raise our industrial capacity for the ramp-up in both civil and defense activities. We recently announced 2 new facilities to support Airbus and Boeing ramp-up, one in Morocco dedicated to the A320 landing gear and another one in Belgium for compressor components, which will equip the LEAP, the GEnx and the GE9X engines. In addition, we just announced a EUR150 million investment in Gennevilliers for our -- for a new 30,000 ton forging press. This will support the LEAP ramp-up as well as our military program, further reinforcing our resilience in forged parts.

In defense, we signed an MoU with EDGE Group in the UAE for the development, the production and the commercialization of advanced air-to-ground weapon system. This is yet another example of the momentum in our defense activities and our ability to forge meaningful partnerships. On the commercial side, we were pleased to see our Arrius 2D helicopter turbine selected to power Guimbal's new GrandCabri G5 helicopter. We are also keeping a strong focus on innovation and future technologies. The ENGINeUS electric motor was recently honored at the 2026 Aviation Week Laureate, marking a significant achievement as the first electric motor to be certified for hybrid and electric aircraft. It was also selected to power the fully electric Bristell B23 Energic aircraft. With that, I will now hand over to Pascal to walk you through the Q1 revenue in more detail.

Thank you, Olivier. Good morning, everyone. Let me give you a quick update on FX. Earlier in the quarter, we saw the euro to dollar rate jump up to almost $1.21, but it then settled back down into a more favorable range between $1.14 and $1.16 in March before stabilizing around $1.17 this week, largely in the context of the Middle East crisis. We use this environment to keep building out our hedging positions for 2029, and I'm pleased to say we are now 80% hedged for that year. In this context, we are confirming our 2026 hedge rate at $1.12 per euro. As of March 2026, our hedge book stood at $59 billion, which continues to give us strong visibility and protection against currency movements. Looking further ahead for '27 and '28, we are still targeting a hedge rate of $1.12. And for 2029, we are aiming for a range between $1.12 and $1.14 based on the market is today.

Now moving on to Slide 7. In Q1 2026, our revenue reached EUR 8.6 billion, which is a 19% increase year-over-year or 23% organic. Organically, that's almost EUR 1.7 billion more than last year, driven by both our services and original equipment businesses. On the currency front, we did see a negative impact of 8.5%, mainly because the average euro-dollar rate was less favorable, $1.17 in Q1 '26 compared to $1.05 a year ago. In concrete terms, that meant a hit of about EUR 600 million on our revenue. Lastly, scope effects added around 4%, mainly thanks to the acquisition of Collins actuation and flight control business last July, which contributed nearly EUR 400 million, and this was partly offset by the divestment of Safran Passenger Innovations for nearly EUR 100 million.

Turning to Slide 8. Let me give you a quick overview of our revenue by activity. Starting with Propulsion. Revenue reached EUR 4.6 billion, which is a 33% organic increase. The civil engine aftermarket delivered a particularly strong performance. Spare parts were up 29% and the main driver here was again the CFM56, which benefited from a favorable comparison against Q1 2025. The strong results also build on the momentum we saw in the second half of last year where we experienced a significant increase in workscope. In addition, the LEAP third-party network kept growing. Also its revenues are still modest compared to the CFM56. Looking now at services, we saw a 43% increase, mainly driven by the LEAP rate per flight hour contracts with volume, workscope and also a favorable comparison base since margin recognition for the LEAP-1A only started in the second quarter of last year. On the OE side, we delivered 520 LEAP engines this quarter, up 63% year-over-year. This substantial increase reflects both the ramp-up, marking quarters in a row with more than 500 deliveries and again, a favorable comparison base.

Moving on to equipment and defense. Revenue grew by 13.5% organically year-over-year or 11.9% if we exclude the transfer of the Safran Ventilation System from Aircraft Interiors. We continue to support the ramp-up at Airbus and Boeing with deliveries of critical equipment such as the nacelles for the A320neo or electrical systems and wiring for the 737MAX, landing gear for the A330neo and the 787. In defense, we benefited once again from strong global demand, especially for optronics, inertial navigation system and guidance systems. Aftermarket services also grew across the board, particularly in nacelle for the A320 and A380 and also for electrical system and wiring on the A380.

Turning to Aircraft Interiors. We saw a 9.2% organic growth or 14.8% before the transfer of Safran Ventilation System. Growth in original equipment was led by very strong cabin deliveries and favorable pricing in business class seats despite lower volumes. Aftermarket services also increased, mainly driven by cabin activities for airlines in North America, Asia and the Middle East.

Turning to Slide 9. We are continuing to deliver on our EUR 5 billion share buyback program. In the first quarter of 2026, we repurchased 1.6 million shares totaling EUR 500 million. These shares are set to be canceled by the end of the year. And I would like to highlight that a new tranche of EUR 375 million of the buyback will be launched in the coming days. On the debt side, we redeemed the EUR 700 million bond issued back in March 2021 as it reached maturity this March. This redemption has no impact on our net debt position. And our long-term debt profile, as shown on the graph, is long dated and now primarily made up of bonds and USPP. Finally, just as a reminder, Safran will propose to its shareholders a dividend of EUR 3.35 per share for the 2025 fiscal year. This represents a total payout of EUR 1.4 billion scheduled to be paid on May 28. Olivier, back to you.

Thank you, Pascal. Our Q1 performance and the strong momentum we continue to see across both civil aerospace and defense gives us strong confidence in our ability to reach the high end of our full year 2026 target guidance. Nevertheless, we remain cautious as the situation in the Middle East remains fluid and its potential effects, notably on air traffic are still uncertain. In any case, the first half of the year should remain largely unaffected. Thank you, and we will now be happy to take your questions.

[Operator Instructions] We are now going to proceed with our first question. And the questions come from the line of Olivier Brochet from Rothschild & Co.

I wanted to discuss the potential difficulties that airlines might see later in the year. And if they decide to defer shop visits, do you have signals that other might step in actually to take over the slots that would have been freed up? That would be the first question. The second one is on spare engines. If there is traffic slowdown, do you think that airlines will effectively reduce their spare engine purchase? And the last one is, you discussed in the press release missile propulsion. Can you maybe tell us how significant it is, sort of, growth that we should expect to the end of the decade and these sort of things, please?

Airlines, interestingly, I spent 2 days last week in Hamburg at what we call the Aircraft Interiors Expo. And that's interesting because this is an opportunity to meet many, many airlines. And during those 2 days, I met about 20 of them coming from everywhere, Americas, Europe, Middle East, Asia, India, China. And what's interesting is that I got no indication at all that there is any potential acceleration in the pace of retirements of aircraft. As of today, if we look at Q1, there has been 44 CFM56 powered aircraft being retired, which is less than 2%. It's about 1.5%. And in the last 3, 4 years, most of the airlines are many complain about the shortage of capacity of aircraft capacity. So I mean, there is no -- even nobody envisions to -- as we speak, to accelerate the pace of retirement. So I'm confident that the pace of retirement will remain low, lowest ever, by the way, lower than before COVID in 2026. And I don't expect that to pick up in 2027. That's one.

Now when we look at shop visits in Q1, we've seen removals of the wing of engines in line with our expectations in Q1, meaning that in Q2, we will see induction into the shop in line with our expectation. And this will feed engine output considering the turnaround time in the shop. This will feed the engine output in Q3 in line with our expectation. So all in all, we are quite confident that, let's say, the volume of shop visits this year will be in line with our expectation. And we have been positively surprised in Q1 by the high number of shop visit with a workscope. In fact, higher than what we anticipated. And this is why, as we speak and as you've seen, we are indeed ahead of our trajectory in Q1. And so we still expect to be ahead of our trajectory end of H1. And this is why this is fueling high confidence to meet the high end of our target.

Spare engines. On the contrary, the appetite for spare engine is very, very significant, in fact. And we -- I mean, we would be able to produce even more engine than what we have planned for in 2026. There would be an appetite for the airframers to take them, but there would be a strong appetite as well from the airlines to take them. So no slowdown for spare engines. You had a question on missile propulsion. As I think I mentioned it, we have decided 18 months ago to invest EUR 100 million in our missile propulsion business to increase the capacity by [ 5 ]. So we see today on our missile propulsion business, we see an increase. We forecast an increase of 20% in 2026 versus 2025. And we think -- I mean, we think this is what we see because we have a backlog of orders, we think that our production is going to be multiplied between now and 2030 by a factor of 4 to 5. There's a big appetite for what we call munition. And this indeed is feeding a strong backlog for missiles and also propulsion, but also seekers and guidance kits.

Could you give us a sense of how significant that business is in the missile for you?

Olivier, we won't provide such a detail, but the kind of growth rate we enjoy in '26 is clearly in the [indiscernible].

But I can at least give you just an indication, not a detail, but we are talking about a few hundred millions.

We are now going to proceed with our next question. And the questions come from the line of Benjamin Heelan from Bank of America.

I wanted to come back initially on the situation in the Middle East and Olivier, your comments about being confident to reach the high end of the guide because there is clearly a scenario where this situation drags on, and it does become quite difficult for a lot of airlines across the world. So you're confident on reaching the high end of the guidance. But can you help us understand from a conflict scenario, like how long are you anticipating within that guide that this situation drags on for? That will be the first question.

The second question is you mentioned little to no impact so far. So in terms of both March and April, have you seen requests for small reductions in scope or delays to some deliveries of spare parts? I'd just be interested over the kind of the last 6, 7 weeks, what you've actually kind of seen on the ground in terms of scope of shop visits and spare parts requests. And then on the LEAP, obviously, a very strong improvement in deliveries. Can you talk a little bit about what you're seeing from a supply chain perspective? Have you seen any incremental tightness given what's going on in the Middle East on the LEAP supply chain in particular? And are you still on track with the LEAP-1B Maverick blade introduction in the first half?

Ben, a lot of questions. On the Middle East, frankly speaking, it's really early to comment or speculate on how long the Gulf crisis will last and how this will unfold. I mean, I don't have a crystal ball on that. Of course, it has lasted for now almost 1.5 months. Probably it will last more. So a few months, I hope, no more. But we'll see. We've not seen any indication yet of any slowdown. It's very clear. We've not seen any indication of any slowdown of engine removals or engine induction. We have not seen any indication of reduction of workscope. And as I said, we've been very positively surprised, in fact, by the higher number in the global mix of shop visit in the higher number of shop visit with a heavy workscope. So in terms of volume of shop visit, we are in line with our expectation.

In terms of price, we could anticipate so we are in line. The positive surprise has come from, let's say, a heavier workscope in average than anticipated. So no indication of any slowdown. And again, in Q1. And again, we don't expect anything in Q2 as well. So we expect to have a strong H1. Supply chain, what we anticipate and what we've seen is, let's say, significant price increase in some specific raw materials, which basically has a cost impact for us indeed. And so we see that as potentially a consequence of a conflict or whatever. But I can give you 2 or 3 examples. cobalt, tungsten are typical examples where the prices have hiked quite significantly. So we -- I mean, we manage that, of course, and we had the buffer and the room to absorb that cost increase on specific raw materials.

Ben, if I may add, I know that you sit in Dubai, so I hope all is well for you and your family. Interestingly, a year ago, it was all about the tariff. If I may discuss a tailwind that we will have in 2026 that may absorb any headwinds that could come up from the Middle East conflict is about tariff. For example, in Feb, I mentioned that the impact or the expected impact of tariff in 2026 should be in the range of EUR 100 million. Given the Supreme Court decision months ago, now our expectation is much less than that, below EUR 50 million, okay? So that's a tailwind. And in addition to that, since the 2 days now, CBP has opened a platform to reclaim the paid tariff for 2025, and we are claiming up to $100 million. So this is typically a tailwind that we could enjoy in 2026 to offset any impact, if any, during the second half of the year or in 2027.

We are now going to proceed with our next question and the questions come from the line of Christophe Menard from Deutsche Bank.

I have 2 questions, one on aftermarket and the other one on defense. On aftermarket, you mentioned CFM56 workscope. What about GE90? Is it also strong? Or where do you see workscope evolving in -- well, in the rest of the year? And on defense, can you comment on the LPM boost that we saw and the impact on your midterm guidance?

Christophe, yes, on what we call high-thrust engine, especially GE90, we've seen a significant growth, and this has contributed as well to our spare parts revenue growth in Q1. We've seen quite also an increase of workscope as well on the GE90. So it has contributed to the growth, which, again, is a good news because, as you know, when we look at the Gulf share of the global air traffic, it accounts for about 5% of narrow-body, but 20% of the wide-body. So it's been a good news. And we don't see -- we see that continuing in Q2.

On defense, yes, the LPM, as you call it in France, loi de programmation militaire, basically is going to be, let's say, augmented with a decision to increase the spending between now and 2030 by EUR 36 billion on top of the already decided EUR 400 billion spending in this period. And announcement has been made that a part of it would be dedicated to what is called munition. So munition means missiles I mean, missiles and other ingredients for missiles. So as I said, guidance kits, seekers, missile propulsion. So yes, it's a boost, indeed. And on top of that, just as a reminder, about 80% of our revenues in defense are related to export, so not France. And we see a big boost here as well, especially in Europe.

Okay. So the LPM boost is probably not enough for you to reconsider your midterm guidance just on the back of that EUR 36 billion boost.

It's a good tailwind and a good contributor, which -- but it reinforces our confidence, I would say, to meet the high end of our guidance.

We are now going to proceed with our next question. And the questions come from the line of Robert Stallard from Vertical Research.

A couple of questions from me. First of all, earlier this week, GE gave a new basis on airline activity for its forecast and its 2026 guidance. And I was wondering if you've done anything similar in your guidance? And then secondly, on Interiors, Boeing highlighting continued seat certification issues on the 787 yesterday. I was wondering if that had any impact on you in the first quarter?

Airline activity we have not gone through a detailed, let's say, exercise of forecasting airline activities. We -- of course, we are studying various scenarios depending on how long the crisis will last. Again, it's very early to -- it's -- I mean, I don't want to speculate. So it's too early to comment on that. Again, we believe that the widebody is the fact -- the wide-body is more impacted than the narrow-body by this crisis in terms of overall number of cycles for the full year 2026. So impact could be, let's say, higher on wide-bodies than on narrow-bodies.

About seats certification, yes, this is an industry-wide, let's say, issue. As we have already commented, the certification, the authorities have significantly tightened their interpretation of certification rules. And therefore, I mean, we are in a situation sometimes where we have delivered the seats to the airframer. And the aircraft is ready to be delivered, but we still wait for the green light of seat certification. So it happens. And again, it is one of the issue that as an industry, and it's really something that we work on with the airframers, we need to find a way to unlock and to ease because it does have an impact on aircraft deliveries.

Now interestingly, and again, I refer to my 2 days in Hamburg last week, I have been again surprised by the level of the demand for new premium seats, new business class seats and first-class seats, which largely exceeds the supply. I mean we are in a situation where seat suppliers are quite often in a position to no bid to request for proposal just simply because the demand is largely exceeding the supply. We -- the reason for that is that many airlines have launched big retrofit program, and they are investing tens of millions for retrofitting their fleet of A380s, 777, 787, A350s. And this comes on top of, let's say, the line fit ramp-up, especially on A350, 787 and 777. So we are in an interesting situation where we still need to unlock those certification issues, but the demand is incredibly strong.

We are now going to proceed with our next question. And the questions come from the line of Ian Douglas-Pennant from UBS.

Yes, I have a few, please. So the first, just on -- going back to the guidance this year. So Q1 has been, as you said, significantly ahead of your expectations. You sound extremely clear that we're not going to see an impact from the Middle East at least this year by the sounds of things. And even if we look back at past cycles, there's been a lag of 12 to 18 months between airline financials and your financials. So could you just help me understand why it is that you haven't increased your guidance on any metric, this quarter, please?

Secondly, on LEAP, just looking at the production rates that we've seen in Q1, am I correct in thinking that you're tracking ahead of your production targets for the year? Or am I overreading into one quarter's numbers? And then just finally on workscopes, can you just help us understand in absolute terms how to think about where workscopes are today? I mean this has been a driver of kind of upgrades to your expectations, I think, over at least the last 18 months, if not longer. But can you help us understand in absolute terms how high they are and what scope, therefore, this has to increase further from here or decrease, if these normalize, how should we think about that? I'm just struggling to size the absolute workscope effects.

Ian, this is Pascal. Okay. On your first question, as we only disclose the revenue for the first quarter as we do as well for the third quarter, you do not have -- the market has no reference for the EBIT at the end of March or the cash at the end of March. So this is why -- and given the uncertainty we have, this is why we decided just to reaffirm the current guidance and reaffirm as well the assumptions behind this guidance in terms of LEAP deliveries, spare parts revenue growth, mid-teens and services revenue growth about 20%. As we clearly said, Q1 is well ahead of these numbers. We are -- we strongly believe that at the end of June, we will be largely ahead of these numbers. So there is clearly an upside opportunity when we will publish our half year results in July that we will revise upwards at least the underlying assumptions behind the guidance. And then we'll see how it does translate in terms of numbers, in EBIT or in cash. So it's not the right timing, and we usually never upgrade our guidance or revise our guidance when we only publish a revenue number.

Ian, on LEAP production, I can say we have guided cautiously at 15%. And we are in line with our production plan. We are in line with our guidance, we will be -- we would be above 2,000 engines being produced this year. So this quarter, we are above 500. So we are in line. So it may well be that we do a little bit better. As again, we have guided cautiously at 15%.

And on the workscope?

Workscope, yes. We -- in fact, there's quite a high number of shop visits with a full scope of work addressing not only the core engine, as we say, the core engine being the hot section plus the HP compressor, but also the fan and the low-pressure turbine. So basically, what we see is that we have an unprecedented number, I mean, proportion of shop visits with a full scope of work. And so we should not expect the workscope to continue to increase. We should expect at least this year, let's say, we've reached this peak in terms of workscope, and we expect that to continue along the year.

If I put that in different words, if I split between shop visit growth, pricing and workscope, when you look to the plus 29% revenue growth in Q1, there was no -- at least for the CFM56, there was no shop visit growth Q1 -- over Q1 last year. Pricing effects, which we had in August last year was mid- to high single digit, meaning that the rest of the performance is coming from the workscope. So it gives you an order of magnitude how huge is the impact coming from the workscope.

Could I just ask a follow-up there, and I hope it's quick. I mean, in the scenario that fuel prices stay structurally elevated and so airlines are forced to reevaluate their maintenance plans going forward, is there any reason why that workscope cannot decline by a similar magnitude?

Again, as a matter of fact, we don't have any indication of that following our discussion with many airlines as of today, we don't see any indication of that. Again, I mean, I don't have a crystal ball. So I don't know what's going to happen in 2027 or so. But the fact is that airlines have learned from the past years that it's wise for them to make sure they have aircraft capacity. And this is why, again, we don't see any, let's say, airline envisioning accelerating pace of retirements or, let's say, today, trending towards telling us that they are going to review the workscope. We don't see that today.

And if we look at the CFM56 utilization pre and post the conflict, it has remained stable so far. So we have no indication at all that there will be a reduction in scope or number of shop visits for the months to come.

We are now going to proceed with our next question. And the questions come from the line of Chloe Lemarie from Jefferies.

Thank you Olivier and Pascal, for the detailed view on shop visit volume and workscope. If I could follow up actually on pricing and how this works from your end. So obviously, I guess, the list pricing increase, you probably already set them and kind of known to airlines. But in terms of the discounts that you grant them, when does this discussion happen? Have you already done that throughout the end of the year? Does that happen at the time of the shop visits? If you could help us understand how things could move versus your initial view on this? And my second question is on services. So we're obviously seeing a very, very strong quarter again. I'm assuming LEAP contracts as the main driver. How should we think about the margin evolution there given that you're now recording profitability on the 1B as well, please?

On pricing, we have not yet finalized and completed the discussion with GE for what we will do on the 1st of August. As you know, on our side, the intent is always to have a couple of points above inflation. So inflation may be the uncertain or the unknown parameter so far. So we will have to think twice about what we do the next 1st of August for the catalog list price for CFM56 spare part and for the LEAP as well. Do we grant discount today to airlines? First, we have not received any demand for that. So the discount that airlines are benefiting from are the one that are very usual depending on the size of their fleet, the importance they have for CFM. So there is nothing new, at least related to the Middle East conflict.

On services, we did enjoy a very strong 43% year-over-year growth, which is well above our underlying assumption of 20% for the full year. So it bodes well for the rest of the year. In terms of margin, we started to recognize LEAP-1A, LEAP RPFH margin last year. And our partner confirmed that they will introduce the Maverick HPT blades on the LEAP-1B during the summer months, June, July. So it will trigger the recognition of margin on those contracts. So you will expect, let's say, in H2 that Safran will recognize not only the 2026 LEAP-1B RPFH margin, but the past margin, which was unrecognized so far. So there will be, as we had last year, a one-off onetime effect lower than what we had on the LEAP-1A, but still a onetime effect coming from this new margin recognition on the LEAP RPFH contracts.

And that's on H2 that you recognized it versus H1 for the 1A last year, right?

Last year, it started in Q2. Yes, in Q2. We started to recognize margins in Q2.

It will not happen in H1.

We are now going to proceed with our next question. And the question comes from the line of Ken Herbert from RBC Capital Markets.

Two questions. First, investors are very focused today on the uncertainty into 2027. I can appreciate services this year, you've got relatively good visibility and conversations with airlines remain very constructive. But is there anything you can provide around visibility into 2027, either in terms of backlog on the services side, any other indicators there? Because I think the primary risk today that's getting reflected or priced into the stock isn't so much the 2026, but it's the potential downside or deceleration of growth in '27. So I know it's a ways out, but any comments on that would be appreciated. And then second, anything you can refine in terms of your assumptions on CFM56 retirements this year. You called out 1.5% of the fleet in the first quarter. Just remind us again the assumptions into the remainder of '26 and '27 on retirements on that engine?

Ken, yes, again, I'm not able to comment or speculate on how this crisis in the Gulf will unfold. And therefore, on 2027, what I can say is we've -- as explained, we've been positively surprised what we've seen and that started in H2 2025, indeed, and it continued in Q1 2026, and it will continue in Q2 2026. We've been positively surprised by the heavy workscope, which basically is the driver for us being significantly ahead of our planned trajectory. So we are ahead of plan.

And again, this basically fuel our confidence to meet this year, the high end of our target. But basically, this trajectory is the one that we had used for even our 2028 expectation. And so we were ahead of plan. We are ahead of plan. And so we have some room to absorb, let's say, some potential headwinds. And we have demonstrated in the past our ability to navigate through headwinds. That's what I can say. On CFM56 retirements, we firmly believe that we will be below 2% this year. And that we don't see today that the number of retirements should be significantly different than what we saw in 2025. In 2025, it was 143 aircraft, and it was 1.5% of the fleet. Q1 44. So we believe we should be around 1.5% to 2%.

And keep in mind that the narrow-body fleet is owned 50% by lessors. They can redeploy aircraft from one area to another, if needed. So we don't see the retirement to pick up even in '27.

Yes, I should have mentioned, I met last week also with the big lessor companies. And none of them today is seeing any impact on the dynamic of the leasing aircraft business, none of them. That's what I can say, factually.

Maybe last question.

We are now going to proceed with one last question. And the questions come from the line of Ross Law from Morgan Stanley.

So just one final one on workscope. And the question is really just around how much flexibility airlines actually have here. So if we obviously baseline the current activity, let's say, at 100, how far down, I guess, could this be dialed? And how much lead time do you actually need to provide you? So if I've got a shop visit in the future, at what point do I need to give you some sort of anticipation or request for that scope? And just lastly, would you agree that this is the one variable most at risk going forward over, let's say, volumes or price?

Flexibility on the workscope. The key point is basically what the airlines have to indicate to us when the engine is removed from the wing. What they have to indicate to us is basically do they want to focus on just the core engine or do they want to extend the workscope also to the fan and to the LP turbine. So this comes basically typically when the engine is removed from the wing. This is why we have some visibility, let's say, 2 or 3 months ahead of induction, I would say. The turnaround time today on CFM56, and this is related to some tension on parts and also on the global MRO capacity, which basically is in line with our anticipation in terms of volume of shop visit, but is also a constraint. We have a turnaround time around 100 days now on CFM56 typically. And so we -- this is why we have some visibility in what's going to happen in Q2 and Q3. No surprise on price. There should not be any surprise. We don't expect any surprise on the volume of shop visit and workscope, again, we have some anticipation. Does it answer your question?

Yes, I appreciate it.

If I may, because I understand that your concern, all of you is more '27 and beyond. We have updated our 2028 ambition for -- it was last Feb. As you know, we always guide cautiously. It was built with the appropriate buffer to overcome some risk. We have not factored in some opportunities as well. We do enjoy strong visibility. And frankly, we strongly believe in the durability of the earnings growth profile of the company. Now we have no crystal ball for the Middle East conflict, and we'll discuss that at the end of July when we can provide numbers for the end of April. But so far, so good. We are running ahead of plan. Thank you for your questions.

So that concludes the question-and-answer session. So I hand back to you for closing remarks. We have no further questions now. Please go ahead for the closing remarks. Thank you. This concludes today's conference call. Thank you all for your participation. You may now disconnect your lines. Thank you.

Welcome to the Safran Full Year 2025 Results. At this time, I would like to turn the conference over to your host, Olivier Andries, Safran CEO; and Pascal Bantegnie, Group CFO. Mr. Andries, please go ahead.

Good morning, everyone. Thank you for joining us. Today, we will review our 2025 results, share our 2026 outlook and briefly walk you through some of our updated 2028 assumptions.

2025 was an outstanding year for Safran. Airlines carried more than 5 billion passengers and against that backdrop of strong demand and still low retirement levels, our aftermarket activities clearly outperformed expectation across both spare parts and services. We have also reached an all-time high in LEAP production, delivering more than 1,800 engines, up 28% versus 2024.

Defense and Space had a particularly strong year as well. In military propulsion, we accelerated M88 production, and we have secured a new Rafale export contract with the Indian Navy. In defense electronics, order intake reached a record level with 1.6 book-to-bill ratio, reflecting very strong market demand.

We have also signed several strategic partnerships, expanded capacity across multiple product lines, and we have achieved the first major export success for Safran.AI, which is a new name we have given to the Preligens company we had acquired 18 months ago. In Aircraft Interiors, [ recent ] seats, commercial wins and improved pricing conditions confirmed that the strategic shift presented at our last Capital Market Day is being executed.

Overall, we outperformed our initial expectation in 2025, delivering record financial results across all metrics. This, despite tariffs. Margin improved by 150 basis points and cash generation approached EUR 4 billion. Reflecting this performance, we are proposing a EUR 3.35 dividend per share, up 16% year-on-year.

Finally, on portfolio management, the integration of Collins actuation activities is progressing well. At the same time, we are moving ahead with the divestment of 2 non-core activities, the sale of Safran passenger innovation was completed last month, and the easier transaction where we are going to sell our share of the joint venture to our partner Embraer is expected to close by midyear.

Turning to Slide 4. Civil business highlights. We invest to secure [indiscernible] and you can see that clearly in our recent industrial announcement with the new LEAP-1A assembly line in Morocco. At the same time, we are continuing to expand our MRO footprint following the groundbreaking of our LEAP MRO shop in Morocco. We have recently inaugurated Safran's largest LEAP engine MRO center worldwide in India.

We are also pleased to mark another important milestone in CFM's long-standing partnership with Ryanair. We announced that 3 days ago, of a new material service agreement that covers the entire fleet of around 2,000 engines, CFM56 and LEAP, and that will support 2 new Ryanair future maintenance, repair and overall shops that they have decided to launch in Europe. This is a compelling illustration of our open MRO market strategy we presented at our last Capital Market Day.

Commercial momentum remains very strong. LEAP continues to be the engine of choice, as illustrated by the recent agreement with Pegasus in Turkey, for 300 LEAP-1B engines, which also includes long-term maintenance services.

Finally, at the Dubai Airshow, Riyadh Air ordered 120 LEAP-1A engines to launch its FA21 neo fleet and selected our wheels and electric carbon brakes for its 787 fleet, ultimately more than 70 aircraft. We have also announced a joint cooperation with Emirates to manufacture and assemble seats in Dubai. And Safran Seats was selected to supply new business and economy class seats to retrofit more than 100 additional aircraft across both the 777 and A380 fleets.

Turning to Slide 5. Momentum remains extraordinary strong in defense. We announced the groundbreaking of the first M88 MRO shop outside of France in Hyderabad, India. At the same time, as we continue to ramp up M88 production. We have also announced a significant investment at our Le Creusot site in France, adding new production lines for complex rotating parts for the M88 engine. We have also signed an agreement with Bharat Electronics in India to create a joint venture to manufacture our HAMMER guided bombs.

Overall, in 2025, we have approved around EUR 1.4 billion of industrial investment, mainly to expand massively capacity across both Civil Aerospace and Defense. With that, I will now hand over to Pascal to walk you through the 2025 results in more detail.

Thank you, Olivier. Good morning, everyone. Today, I'll walk you through the adjusted accounts, and you'll find a bridge to the consolidated statements in the appendix. Let's start with FX trends, which are shown on Slide 7. In 2025, our trading floor faced a really volatile environment. The dollar weakened against the euro, the whole year, which wasn't easy to manage. Still, our team did a great job protecting the portfolio, and we managed not to trigger any KO barriers.

That said, at the end of Jan, the euro-dollar shot up past 120, and that caused us to lose less than $1 billion in hedging volume, so less than 2% of the whole portfolio. We reinstated the same hedge volume afterwards so that did not impact our goal of reaching $112 in 2026. Based on the actual figures for 2025 and to reflect our revenue profile now that we include the actuation and flight control business, we have increased our expected exposure to $16 billion in 2026 and $17 billion from 2027 onwards.

As always, these number should not be seen as a medium-term business outlook. We are confirming the $112 hedge rate for 2026, and we'll do our best to secure that rate for '27 and '28. We've also started hedging for 2029. And as a first indication, we are targeting a hedge rate between $1.12 and $1.14 based on current market conditions.

Now if we look at Slide 8, our 2025 revenue came in at EUR 31.3 billion. It's EUR 4 billion higher than last year, which is up 14.7%. That's actually 14.8% organic growth, and we saw steady growth quarter-after-quarter throughout the year. OE sales went up by 11.3%, thanks to both higher volumes and better pricing. Services revenue was up 18%, showing just how strong airline demand was for MRO and spare parts.

Changes in scope added a positive 3%, mainly because we brought in the actuation and flight control business, but the boost from this acquisition was completely offset by a weaker dollar, which dragged things down by 3.2%. Our recurring operating income reached EUR 5.2 billion, so that's more than EUR 1 billion higher than last year. The operating margin was also up by 150 basis points, hitting 16.6% of sales.

The solid performance was mainly driven by strong results in the aftermarket, volume growth and our continued focus on operational excellence and keeping Safran competitive even in such a sweet environment.

If we move to Slide 9, you'll see a summary of the income statement. Apart from sales and EBIT, which I'll get into in more detail later on, let's look at some of the other key P&L items. We had one-off items totaling EUR 479 million, which is a pretty big number. So most of that is in cash. About half comes from the EUR 244 million pretax capital loss tied to the divestment of Safran Passenger Innovations.

There's also EUR 178 million in impairment charges on some programs and then a few other cash costs like restructuring and M&A expenses, especially from the actuation and flight control acquisition.

Looking at financial income, our returns on cash investments actually topped our cost of debt, bringing in a net EUR 116 million in financial interest. Our apparent tax rate was 32.3%, which was heavily influenced by the French corporate surtax, EUR 370 million, which cut around EUR 0.90 per share of our EPS. All in all, net income attributable to the parent was EUR 3.2 billion, up 3% year-over-year, and that works out to EUR 7.6 per share.

Let's dive into our businesses, starting with Slide 10 on Propulsion. Revenue here reached EUR 15.7 billion, which is a 17.6% organic increase. When we look at Propulsion services, revenue was up 21% organically. For the Civil aftermarket, spare parts sales climbed 18%, mainly thanks to the CFM56. That drove more shop visits, mid-single-digit growth and a higher proportion of full work scope shop visits.

High thrust engines also did well, helped by growing wide-body traffic. LEAP engines contributed too, with third-party shop visits making up about 15% of total shop visits in 2025. We saw a 30% jump in services overall, mostly because LEAP aftermarket activities expanded under rate per flight hour contracts. Both helicopter turbines and military engines also helped drive propulsion services growth.

On the OE side, revenue grew by 12% organically. We delivered a record 1,802 LEAP engines. So that's 28% growth compared to 2024 and well above our initial target. In Q4 alone, we delivered 562 engines, up 49% from Q4 last year. So we have surpassed 500 deliveries for 2 straight quarters now, which looks good for our 2026 goals. While M88 fighter engine deliveries were down year-over-year, production actually ramped up a lot in 2025, just as we had planned to keep up with a strong backlog, especially for export customers.

Recurring operating income was EUR 3.6 billion, 28% organic growth. The operating margin stood at 23% of revenue, up 2.4 points, which is a strong result and almost aligned with our initial guidance earlier in the year, even with some lingering tariff impact. This improvement was mainly driven by strong civil aftermarket activity and really robust performance from CFM56, both in volume and work scope. The LEAP program also contributed with us starting to recognize profits on LEAP-1A RPFH contract and a still high ratio of spare engines.

Let's now move to Slide 11 and talk about Equipment & Defense. Sales here is EUR 12.3 billion, which is up 11% organically and 16% overall. That includes about EUR 618 million from the Collins actuation and flight control business, which we consolidated for 5 months in 2025. OE revenue was up 11% organically with growth pretty much across the board. The strong performance in 2025 was mainly driven by higher volumes in defense, especially for things like the HAMMER-guided bomb, missile seekers and navigation and timing systems.

We also saw good momentum in primary electrical system and wiring as well as nacelles and landing gears, especially for the A320. Aftermarket services benefited from the uptick in air traffic, going up by 12% organically with growth everywhere, but especially in landing gears, nacelles and evacuation slide systems. Recurring operating income came in at EUR 1.6 billion, and our operating margin improved by 50 basis points or 90 basis points if you exclude Collins, showing that we are making steady progress toward our 15% margin goal for 2028.

The strong performance was driven by a favorable business mix and our efforts to stay competitive. OE volume growth was especially robust for narrow-body platforms as well as in avionics, defense and space. Services also did well with strong demand for carbon brakes, landing gear, nacelles and aero systems.

One quick side note. As of Jan 1, 2026, Safran Ventilation System will move from Aircraft Interiors to Equipment & Defense, so we can create more synergies with our power electrical business. SVS is a profitable business. It brings in a double-digit operating margin with revenue slightly under EUR 200 million.

Finally, looking at Slide 12. Aircraft Interiors continued to make real progress on its turnaround. Sales reached EUR 3.3 billion, including Safran Passenger Innovations, our IFE business, which is a 14% increase and actually bring us back to 2019 levels. OE sales went up by 15%, mostly thanks to higher deliveries in cabin, especially galleys, inserts and water and waste system for A320 and 737.

Revenue also got a boost from our IFE activity as well as from higher volumes and better pricing on business class seats. Services were up 13%, mainly on the back of demand for Cabin spare parts, especially from customers in the Middle East, Asia and the Americas as well as from SVS, which I mentioned earlier, will transfer over to Equipment and Defense in 2026.

Seats also did well, both with spare parts and services and passenger innovations helped out on spare parts and repairs. Recurring operating income crossed EUR 100 million with operating margin up 2.3 points. Cabin kept capitalizing on shifting production to best cost countries like Mexico, the Czech Republic and Tunisia and also on renegotiating prices for the lower-margin programs.

IFE activities helped lift profits overall and seats kept improving, thanks to ongoing work on pricing and operational excellence. The strong performance really shows our focus on pass-through and price increases, which helped offset the impact of tariff. The very good news is that Aircraft Interiors has now reached cash breakeven with a noticeable EUR 140 million improvement just over last year.

Now if we look at Slide 13, we generated EUR 3.9 billion in free cash flow, which is up 23%. That gives us an EBIT to cash conversion ratio of 75%. The strong result came from a 17% increase in EBITDA, so higher earnings less an impact from one-off items, along with a positive impact from working capital changes. For the first time since COVID, we managed to reduce inventory DSOs by 9 days.

Also, we did increase inventories in dollar to support the ramp-up that was more than made up for by a strong inflow of advanced payments, which were higher than last year, especially thanks to the Rafale orders and other defense programs. We also paid an extra EUR 1 billion in income tax, reflecting our higher taxable income and including the EUR 377 million French corporate surtax.

At the same time, we're still investing to support our growth and prepare for the future. Tangible CapEx was just under EUR 1.2 billion, focusing mainly on expanding engine MRO capacity and increasing production, especially for landing gears, smart weapons and resilient P&T systems.

On Slide 14, you'll see that Safran ended 2025 net cash positive at pretty much exactly the same level as in 2024, right down to the nearest million. That's actually just a coincidence. This puts us at about 0.3x EBITDA. In line with the capital allocation framework highlighted at our last Capital Market Day, we made organic investment to sustain our growth and prepare for the future for about EUR 1.8 billion in R&D and CapEx as well as inorganic investment for EUR 1.6 billion, the main cash outflow this year being the Collins flight control and actuation system.

We also returned EUR 2.6 billion to shareholders with the balance between dividends and buybacks. We also redeemed our OCEANE 2028 bonds early using shares repurchased in 2023 and 2024, which helped cut out on net debt by EUR 0.7 billion. Bottom line, Safran is still completely deleveraged, and we are in a really solid position with a strong balance sheet.

For 2025, we are proposing a dividend of EUR 3.35 per share. That's a 16% increase compared to last year, and it does represent a 40% payout based on the adjusted net income, mainly restated from the capital loss from the SPI divestment. This year, as part of the EUR 5 billion share buyback program, we also bought back 5.1 million shares for cancellation, which cost a total EUR 1.3 billion. In December, we went ahead and canceled all shares that were being held for that purpose, so 5.3 million shares in total, resulting in capital ownership accretion of 1.6%.

Also, between '24 and '25, we canceled 8.9 million shares, which amounted to EUR 2.1 billion and led to a 2.13% capital ownership accretion. Looking ahead to 2026, we'll keep moving forward with our share buyback program. The first tranche actually started early in mid-Jan.

Just before we wrap up this section, let's quickly look at Slide 16. It's a quick reminder of the goals we set for 2025 back in December '21. I'm happy to say that we met or even exceeded all our key targets for 2025, which really shows our commitment to operational excellence and our focus on delivering strong 2-digit profitable growth.

Over this period, both our revenue and free cash flow more than doubled, well ahead of our original outlook and EBIT grew even faster, nearly tripling what -- starting from a 10.2% operating margin in 2020 and landing at 16.6% in 2025, close to the middle of our 16% to 18% target. We achieved all this despite facing plenty of challenges, things like inflation, supply chain disruptions, tariff and even the French corporate surtax. So it really highlights how robust our business model is.

Now let's take a look at our outlook for 2026 and our ambitions for 2028 to see what's coming next. Olivier, over to you.

Thank you, Pascal. I'm now turning to Slide 18 and our 2026 outlook. We expect to continue the LEAP delivery ramp-up with a further 15% increase. Operating in a still favorable environment, Civil aftermarket should continue to expand with spare parts up mid-teens and services up around 20%. In particular, Q1 should see a strong start in spare parts, helped by an easier comparison base. As a reminder, this outlook excludes Safran Passenger Innovation, which was divested on January 30.

In more detail, for 2026, Safran expects revenue up low to mid-teens, recurring operating income between EUR 6.1 billion and EUR 6.2 billion and free cash flow between EUR 4.4 billion and EUR 4.6 billion, including an estimated EUR 470 million impact from the French corporate surtax.

Let me now revisit some of the assumptions we shared at our Capital Market Day '24. Starting with LEAP OE on Slide 19. Our Q3 and Q4 delivery performance, more than 500 engines per quarter reinforces our confidence in delivering another 15% increase in 2026 and in reaching around 2,600 engines by 2028. This ramp-up is supported by continued supply chain improvements and the ongoing execution of our resiliency plan. On the performance side, LEAP continues to mature faster than the CFM56. For LEAP-1A, more than 1,450 kits of the new HPT blade have now been produced. This upgrade can more than double time-on-wing in harsh environment, bringing shop visit intervals in line with the CFM56.

In parallel, around half of the LEAP-1A fleet is now equipped with the reverse bleed system highlighted at the Capital Market Day 2024, which reduces on-wing fuel nozzle maintenance. And for LEAP-1B, both the reverse bleed system and the HPT blade upgrades are expected to be certified in H1 2026 delivering the same durability improvements to the 737 MAX operators.

Continuing with civil aftermarket on Slide 20. We are revising our CFM56 assumptions upward. In line with our partners' comments last July, sustained maintenance, repair and overhaul demand from operators and as a result, very low retirement levels supports a stronger outlook for CFM56 shop visits through 2028. We now expect a plateau of around 2,300 to 2,400 shop visits per year from 2025 to 2028.

Compared with our Capital Market Day '24 assumptions, this represents more than 750 additional shop visits over the '25, '28 period. Beyond that, while shop visits are expected to start declining from 2029, we continue to see pricing and work scopes supporting CFM56 revenues through the end of the decade. On LEAP, our assumptions remain largely unchanged. We continue to see strong growth in shop visits with work scopes expanding. And we still expect the share of external shop visits to double from around 15% in 2025 to about 30% by 2030.

Moving to Slide 21. The updated assumptions we've just discussed translates into around 15% additional revenue over the period compared with Capital Markets Day '24. As a result, the revenue annual growth between '24 and '25 is now expected to be in the low teens, up from mid- to high single digits at the time of our Capital Market Day '24. Profit growth is expected to follow a similar trajectory.

Turning to margin at completion across the LEAP Red per Flight Hour portfolio. Progress has accelerated since our last update. Compared with CMD '24, we have delivered a further 2 points improvement, bringing the total margin increase to around 7 points between 2021 and 2025. This reflects both more favorable terms on new contracts and our continued focus on optimizing existing agreements whenever possible. And just as a reminder, the majority of the profit from the Red per Flight Hour contract portfolio will be recognized after 2030.

As a result, on Slide 22, you can see that we are raising our 2028 targets. On revenue, both additional aftermarket activities and the consolidation of actuation support higher growth. We are, therefore, increasing our outlook with 2024 to 2028 revenue compared annual growth now expected to be around 10%. On EBIT, we are raising our 2028 guidance by EUR 1 billion. In propulsion, we are increasing our margin target from the low 20s to 22% to 24% despite tariff and an accelerated OE ramp-up.

In Equipment & Defense, we confirm a mid-teens margin in 2028, now including the actuation and flight control activities. In Aircraft Interiors, we now target a high single-digit margin in 2028, which only reflects the divestment of Passenger Innovation and the transfer of Safran Ventilation Systems from Aircraft Interiors to Equipment & Defense. On free cash flow, we now expect an additional EUR 4 billion to EUR 6 billion over '24 to 2028. Despite the higher impact of 2 years of French corporate surtax around EUR 850 million compared to roughly EUR 500 million at Capital Market Day '24 and despite tariff.

To conclude, let me briefly highlight a few key priorities. First, we remain fully focused on meeting customer demand while managing the OE ramp-up. We will continue to improve competitiveness and strengthen our industrial resiliency. We will also keep customers flying by providing spare engines, spare parts and by expanding our internal maintenance repair and overhaul network.

In parallel, we expect to complete several divestments in 2026 in line with our portfolio pruning strategy. We will pursue our ambitious research and technology road map to prepare for the next single-aisle generation and to drive decarbonization. And finally, we remain firmly focused on our growth trajectory with the objective of increasing operating profit, expanding margin, strengthening cash generation. Thank you for your attention. We are now happy to take your questions.

[Operator Instructions] We will now take our first question, and this is from Christophe Menard from Deutsche Bank.

Congratulations for the results. I had 3 questions. The first one on the cash conversion in 2028. And this is over clearly the '24 to '28 period, the 70% conversion. If I do a back of the envelope calculation, I'm getting the sense that you're probably targeting more conversion of 65% in later years. So is there a phasing on your cash? And is it linked to, for instance, prepayment outflows that we may have in the coming years? I will follow up with the next 2 questions afterwards, if you want.

So we upgraded our 2024-2028 cumulative free cash flow guidance to EUR 21 billion. As you rightly said, it could be an EBIT to cash conversion slightly below 70% in the outer years. What I could say is that we have not included yet any impact for 2027 and 2028 from a potential continuation of the French corporate sale tax. It could be EUR 0.5 billion for each year. It's not included in our guidance. At the same time, we have not included any new Rafale advance payments that may come from new contracts, and you can see quite a large one coming in from Asia.

So the free cash flow upgrade guidance is coming from upward revision from aftermarket, the upward revision of LEAP engines deliveries as well. When you try to figure out what your EBIT to free cash flow conversion will be, it's all about the working capital expectations. Here, we have put some decrease in our inventory DSOs, as I said during the call, starting in 2025, continuing in 2026 and going forward. Should we deliver more equipment, LEAP or other stuff, then we could be able to have more favorable working cap changes. So we'll see with time. And we have included advanced payments, which are already booked in terms of orders, notably on Rafale.

Thank you very much for this. So I understand there is a degree of conservatism as well on this. The 2 other questions. I think you said on the call earlier that you were getting ready for rate 75. You mentioned Morocco. This is all for 2027? Or can you share the time line for rate 75 on your [ end for your ] and the capacity you're putting online. And one quick question on the margin '26 per division. My understanding from what we're seeing on your guidance propulsion maybe -- can we assume that propulsion is more at the high end of the range you gave on your Slide 22?

Christophe, I'm going to answer on rate 75. I'm just saying that we take decision to invest to get prepared for rate 75. It's not up to me to comment when Airbus is going to be ready to reach rate 75 full year. But basically, what I'm telling you is that we are investing for that because we acknowledge that the demand is there for some time. So it's worth investing. That's why we have announced our LEAP assembly line in Morocco. It will help us meet rate 75. This assembly line is going to be ready by '28. And you may see in the future, we may announce future investment also in line with our objective is to meet rate 75 on other equipment as well. So we are just getting prepared. We have to be realistic. It does not happen overnight, but we are getting prepared. We are investing.

On your third question about margin per division, when you compute our guidance, you'll see that we continue to expect some margin expansion at group level. We also expect margin expansion at all 3 branches, including propulsion with a starting point, which is 23%. By the way, it's a 2.4% improvement from last year. And a year ago, I told you that we were about to grow our margin by 250 basis points, which we almost did despite tariff.

So right, in 2026, we expect to continue to grow our margin in propulsion. The same in Equipment & Defense. It will be a slight improvement in Equipment & Defense because we will have a full year impact of the Collins actuation and Flight Control business, which, as you know, for the time being, is dilutive to our margin. And in Aircraft Interiors, despite the divestment of SPI, Safran Passenger Innovations and the transfer of a profitable business from Aircraft Interiors to Equipment & Defense.

And despite that, we will see a decrease in revenues, we still expect to maintain or slightly increase our operating margin in Aircraft Interiors. So all in all, at group level and all branches, we should see some margin expansion in 2026.

We'll now take the next question. This is from Sam Burgess from Goldman Sachs.

I've got a couple, if I may. Firstly, just on your free cash flow guidance. I mean, given the strength of the upgrade, sort of 30% on previous, can you see yourself accelerating the existing buyback? And just help us think through how you're thinking about capital allocation with that additional cash? And just secondly, in terms of the LEAP orders that you're signing today, can you just help us have some color on how many are going at the moment proportionately to long-term service agreement contracts versus T&M? That would be really helpful.

I'll take the first question on the free cash flow upgrade. On capital allocation, there is no need to change our philosophy or policy today because we have a 40% dividend policy -- sorry, 40% payout dividend policy that will remain unchanged for the next years. And as you know, we are executing a EUR 5 billion share buyback program. In 2025, we only executed 1/4 of that. So I would expect to execute another quarter of that program in 2026. We can always decide to speed up or slow down the execution of such a program. But as long as we still have the program into force, there is no reason to change that.

Hello, Sam. On LEAP, especially on support and services contract, we see now a good mix of what we call rate per flight driver contracts and material service agreement where we just provide spare parts and repair solution. And by the way, as I mentioned, the announcement we made 3 days ago with Ryanair is a perfect illustration of that. Ryanair has decided to invest in their own MRO shop, and we have decided to support them to do so in their own ramp-up.

And also, we have concluded an agreement whereby for all this period, 15 years or more, we are going to provide spare parts and repair solution to them at negotiated conditions. So you see this is really an illustration of our long-term strategy where we see, let's say, a 50-50 share between flight contracts and, let's say, typical time and material or MSA contracts.

It's interesting because in the past, usually only the legacy airlines have their own MRO shop, the Air France-KLM, the Lufthansa, the Delta Airlines. And we see now with this first mover, Ryanair has been -- is the first mover. We see a low-cost carrier investing in their own MRO shop, that's interesting. And for me, this is a trend, an interesting trend. I'm not saying that all of them will do that, but I'm sure we'll see more airlines coming into that kind of play.

I mean just a very quick follow-on from that, if I may. If you in terms of your MRO capacity expansion ambitions on LEAP, does that change at all with that kind of dynamic? And I guess, as a follow-on implications for propulsion margin over the midterm.

No. We -- there is no change. The compass is still the same, meaning that together between both partners, GE and us, basically, we aim at basically having internal LEAP shop visit representing about 50% of the global work. And we incentivize, we make sure basically and we -- yes, we want to favor those airlines and third parties that are jumping in the LEAP MRO.

We want it to be an open MRO market. So external shop visits should long term represent 50% of the overall. So we are executing our MRO plan to increase capacity. As we have already said, it's about a EUR 1 billion investment just for maintenance shop, excluding, by the way, repair shop. This is only engine maintenance shop, EUR 1 billion. And basically, the plan is executed as planned. Morocco, India, Mexico, further investment in France and Belgium as well. And I know our partner is on the same path.

Okay. So no change to previous guidance on that.

We'll now take the next question. This is from Milene Kerner from Barclays.

I have 2, please. Olivier, you mentioned that 1,450 durability kits have been produced on the LEAP-1A so far. How do you expect a proportion of Light scope event to involve as the durability kit continues to grow across the rest of your LEAP 1A fleet and then the LEAP-1B. And what does that mean for the medium-term free cash flow trajectory? And then my second question is, as you're exiting now noncore cabin and interior and you're adding targeted defense assets, how should we think about your portfolio in the long term in terms of the mix between commercial and defense?

Milene, I'm not sure I got fully your question on the blades. The fact that part of the fleet is already equipped with those blades basically will just increase the intervals between shop visits. So this will push out for those LEAP engines that are equipped with the new blades, the shop visits are going to be pushed out, which in rate per flight hour contract is a positive for us, in fact, because it increases the maturity of the engines.

So when are we going to have a full fleet of LEAP-1A equipped? I don't have a precise answer to that question. We'll start with the LEAP-1B as well. What are the consequences in terms of free cash flow? To be very clear, it's a positive as well because as today, most of our contracts are RPFH contract. Basically, any shop visit, any early shop visit is a spend for us. So maybe, Pascal, you can add comment on that?

Yes, I'll give it a try. With time, what matters is the mix between what we call quick turn and full performance restoration shop visit. And the more new HPC blades we have in the fleet, the less quick turns we need in the maintenance shops, meaning that the mix will evolve in a favorable manner in the years to come, which will benefit both EBIT and free cash flow going forward. But it is already in the plan and in our 2028 guidance.

On portfolio management, without entering into detail, I'll just give a tendency that should not surprise you. The tendency is that our Aircraft Interiors exposure should, with time, basically decrease as we are still executing our plan to divest some noncore activities inherited from the ex Zodiac acquisition and a significant part of them being in the Aircraft Interiors activity.

So our aircraft interior exposure should reduce should be reduced. And I would say, as we stand ready to seize opportunities and as defense is a strong booster for everybody, if there are some, let's say, opportunities that are just passing by, that could be of interest for us in terms of technology because it's a good complement to what we do. And if it makes sense economically, we are ready and we can be agile and we are ready to jump in. So I would say in terms of tendency, directionally, our defense activity should grow and our Aircraft Interiors activity should be reduced long term.

We'll now take the next question. This is from Benjamin Heelan, Bank of America.

And I wanted to ask my first question on supply chain. We haven't actually touched on it a lot on this call yet. Can you talk about what you're seeing across the business? What are you seeing in LEAP? What are you seeing in the equipment business? Where are the challenges? Where are things improving? If you could just provide a bit of an overview in terms of what you're seeing from a supply chain situation, that would be great.

Second question is on the propulsion margin, sort of '22 to '24. Could you provide a couple of swing factors within that, right? What's going to cause you to get to '22? What's going to cause you to get to '24? And how should we be thinking about R&D within that as well? I keen to hear that.

And then thirdly for me, interesting on the presentation at the back, you've obviously given us guidance on the number of CFM56 shop visits, but you haven't given us any numbers yet on the LEAP. Could you provide a bit of a range in terms of heavy work scopes for LEAP that you're expecting in 2030. And then associated with that, obviously, you talked about the margin at completion of the LEAP improving 7 percentage points. When should we be assuming that the margin that you're booking on LEAP shop visits is going to be comparable to CFM56? How should we think about that?

Ben, many questions. I'll take the supply chain one. Just to say, directionally, we see an improvement of the supply chain. I'm not telling you this is blue sky yet. But we've seen in the course of 2025, let's say, noticeable improvements all across the board, not only on the engine side, but also let's say, the equipment side as well. What are the remaining challenges? They are mostly always more or less the same. It's upstream, I would say. It's about raw materials. It's about forging and casting.

And by the way, this is why we have taken the decision at Safran to unlock, let's say, the situation on forging and casting. This is why we've decided to invest in our own casting facility, turbine blade casting facility of our own. We have decided to invest and we are investing in forging. We are the only -- I'm not sure that whether you know that, but we are the only engine manufacturer in the world having forging capacity internally. We are the only one. And we have decided to invest more in forging as well. So we -- basically, we have a strategy to, let's say, unlock the situation and to, how could I say, decrease our dependency or exposure to some big guys that could potentially have a [indiscernible] strategy. Then I would say the one that we are looking at very carefully and for which we have a resiliency plan is relating to rare earth, which is typically one of the areas that has been weaponized by some countries in the frame of those geopolitical tensions.

And so on rare earth Basically, we are building stocks. We are also working on some alternative supply chains. I'm not saying that we are going to do that ourselves because this is not it's not our own activity, but we want to make sure that we can find alternative. Again, our compass is not only to continue to work on our competitiveness, but it's also to continue to work on our resiliency.

Okay. On your second question about the main drivers for profit margin expansion or decrease in propulsion. So there are many drivers. First, on civil engines, it's all about the number of installed engines and the ramp-up that we have in front of us. You know that the more installed engines we deliver, we have a loss per engine, even though it is reducing per unit, but still it is a loss. Then the spare engines, what we are looking at is the number of spare engines or the ratio between spare engines and the total number of engines being delivered.

Today, it's pretty high at low double digits, and it tends towards 10%, 12% for the coming years. So it will be a negative if it goes down. Then it's all about aftermarket. As long as we continue to enjoy from very strong spare part momentum, not only on CFM56, but on the LEAP and IRS engines, it will be a positive. Then it's all about our policy to release profit margin on the LEAP RPFH contracts. As you know, we started to release margin on LEAP-1A RPFH contracts last year. As soon as we introduce the LEAP-1B new HPT blade in H1 this year, we will start to release margin on LEAP-1B contracts as well. As you know, it is capped by construction. We don't intend to release much of the margin before 2030. The good news, as Olivier highlighted in his concluding remarks is that the margin or the expected margin at completion of our book has increased by 7 points from 2021 to 2025.

So we have more potential in terms of profit into our books that will be mostly released after 2030. So the name of the game, as you know, for us, is to avoid any dip in margin anytime in a year. This is clearly the target we have together with Olivier. And then one item which is not under our control is tariff. Tariff is given today. We know that we are in a fluid environment to say the least. So that may change one way or the other. Then on your sub question, I'm not sure I got all, but I'll try to answer it.

I guess it was related to the long-term propulsion margin. And at some point in time, we are expecting a sunset of our CFM56 spare part business, likely starting in 2029 or 2030. We will have to start to release more profits coming from the LEAP RPFH contracts, but also from the LEAP spare parts activity as well. Olivier commented that we are diverting part of the customers from RPFH to time and material, more conventional spare part sales. Again, the name of the game is to avoid any dip in margin. So today, we have a fixed formula to release our profit. By the way, we have made little progress. I would say the progress rate of our LEAP RPFH contract is very low. It's about 5% today. So the potential is huge in terms of dollar profit for the next decade. So I'm not worried that we will be able to have no dilutive impact in the years to come. I hope it answers your question, Ben. Otherwise, please.

Yes. No, it does.

We now take our next question. This is from Chloe Lemarie from Jefferies.

I have 2, if I may. The first 1 is coming back on the 7 points of improvement in the lead portfolio margin I think, Olivier, you said that the assumption from the CMD were actually largely unchanged in LEAP. So should we assume that it's because that change in portfolio margin will mainly flow through the P&L beyond 2028. The second 1 is on the hedge book. In Q1 last year, Pascal, you commented that you were working on firming up the rate to avoid the knockout activation. Could you maybe share how this has evolved and if we should consider that 2028 is now almost fully firmed up. And on the comments you made on 2029. If spot remains where it currently is, should you be able to build a full coverage for that year within 1.12 to 1.14. Is that how we should understand the comments you made?

Yes, as we said, between '21 and '25, we've been able to improve our expected margin at completion of our RPFH book by 7 points. Most of the profits will be released in the next decade. So it has no impact on the short-term '25, '26, '27 profit recognition methodology as we do cap our profit release by construction. So no change. But what I'm saying is that the overall expected profits within our books is even bigger than what it was a year ago.

On hedging, FX hedging, as I say, we had faced a weakening of the dollar against the euro across the year. It now stands at $1.18, $1.19 per euro. all our KO barriers are within 121 to 130 or so. So if there is any peak in euro-dollar at any time as we did face at the end of Jan, then there is a risk that we may lose part of our hedging volume.

Nevertheless, I'm really confident that we can deliver $112 in '26, in '27 and '28. For 2029, we are starting to hedge our year at $17 billion exposure. Given the current market conditions, the 1.12, $1.14 range seems achievable. Now the risk is that should the euro-dollar moves up again and stands at 125 or 130, there is no magic in what we do with our trading room. It means that with time, we'll see the hedge rate going up and converge to the spot rate. But there is a lag to that phenomenon. So as long as it stays within the current range, below 120, I'm comfortable we will maintain 112 up to 2028.

We'll now move to the next question. This is from Olivier Brochet from Rothschild.

Two questions from my side, please. Could you elaborate a little bit on the growth that you've experienced in defense in 2025. If you could share numbers on that in equipment. And the second 1 is on wide-body programs. Do you see some risk on volumes there coming from seats or the rest of the cabin in terms of your capacity and the ramp-up point of view, please?

Olivier, Growth in defense, the dynamic has been extremely strong in some key munitions especially we have what we call a guided bomb, which is named Hanwha, which is extremely successful in export markets and is highly demanded at the moment. You may have seen that -- I can confirm you may have seen yesterday that Norway has decided to order hundreds of them, basically that they want to deliver to Ukraine. So these are what we are talking about. So are guided weapons that we manufacture.

We have multiplied by 4 our production in the last 3 years. And I believe we will continue to scale up. Another example is our inertial navigation systems where that do equate mainly military equipment, aircraft, helicopters, tanks, ships, submarines, but also artillery.

And here as well, the demand is extremely strong, and we believe we are going to multiply our production by probably 3 to 4 as well. Last example I'd like to mention is missile propulsion. We -- we are a missile propulsion designer and producer. And I think we are the only one in Europe to do what we call turbo reactor for missile. We are equipping the Scalp/Storm Shadow cruise missile or the exocet missile, but we are also equipping missiles that are designed and produced by Saab in Sweden or Kongsberg in Norway. And here as well, the demand has grown very massively. So we've just -- we have decided 18 months ago to invest that's EUR 100 million in our facility to multiply our production by 5. So those are examples of the very significant scale-up that we see in defense. On top of that, the demand is high also on optronics.

We are a player in portable optronics or onboarded optronics for UAVs, for helicopters, for maritime patrol aircraft. And here as well, the demand is very strong. So all in all, on Defense Electronics it's 1.6 book-to-bill ratio, and I can promise that the book-to-bill ratio in 2026 will be far above 1 again. On seats and widebody, indeed, the demand for -- especially business class seats is extremely strong. And I think it's unprecedented again. And interestingly, it's not only a demand for line fit aircraft, but it's also a strong demand for retrofit aircraft.

So basically, we've delivered this year, I think if I remember well, it's 2,600 business class seats, significantly above what we've delivered last year. And the growth is very, very, very strong. So we are going to invest to increase our capacity in business class seats. And this is what we are talking about with Emirates. We are going to build a new assembly line in Dubai for that because -- just to meet the demand. Now we still face -- I mean, we have significantly improved our development process. So today, we deliver on time. We deliver on quality to the airframers and to the airlines. But we are still facing rising expectation on the certification side. We are experiencing also a tighter interpretation of pre-existing rules. So all in all, this -- and this is an industry-wide situation. It's not specific to Safran. But the consequence of that is that, yes, indeed, seats could potentially be a pacing item for the ramp-up of the wide-body aircraft just because of, let's say, the tighter tightening of interpretation of pre-existing certification rules. Is it clear?

Extremely.

We will now take the next question. This is from Adrien Rabier from Bernstein.

Just 1 follow-up, if you may, on the CFM56, please. Could you explain a little bit on what you expect to happen after 2028, the trajectory for shop visits? And then you mentioned pricing and scope of potentially in time. So any detail you can provide would be very helpful.

Well, I know that the dynamic has evolved in the latter years because, as you know, we were expecting, let's say, the start of what we call the sunset earlier than what we do see today. And this is a consequence of the so-called flying more for longer situation. So it's a dynamic situation. Today, we are very, very confident that the volume of shop visit will remain at this peak of 2,300, 2,400 up to 2028. So how will the dynamic unfold after that is still to be seen. So this is why basically we take a cautious approach there. It's going to be, let's say, it's going to be a combination of how quickly Airbus and Boeing are going to reach their peak rate for, respectively, the A320s and the 737.

And they are on a trajectory to, let's say, to go up by then. It's going also to be -- one of the other elements in play is going to be the level of aircraft retirement. And I have to say, in 2025, there has been a very low level of aircraft retirement. We've been -- it's been about 150 aircraft, so more or less the same as in 2024, no change. And therefore, this is not feeling any used part market. So really, it's going to be a combination of traffic growth.

The traffic growth in 2025 for the narrowbody has been more than 5% compared to 2024. So is it going to continue at this pace? So this is one entrant. The other entrant is going to be how many new gen aircraft are going to get into the fleet. So how fast are Airbus and Boeing going to be able to reach their peak rate. And the third element is going to be the level of aircraft retirement. So it may well continue for 1 or 2 additional years. It's too early to say. It's really today a question of how this dynamic will unfold.

And the next question is from Ross Law Morgan Stanley.

So the first one is just a follow-up on portfolio. You've previously spoken about an ambition to divest about 30% of the legacy Zodiac assets. Can you maybe just give us a progress update here? And how much of this target is covered by the recent deals? And when should we expect you to achieve this target? Second question is just a quick one on your 2026 FX assumption for the spot rate at $1.15.

And it's been tracking around the 118, 119 mark year-to-date and at present. I'm just wondering why you are assuming $115 and not higher? And then lastly, just on the media article yesterday suggesting you're working on advanced ducted engine as a possible more traditional alternative to RISE for next-gen narrow-body. Are you able to confirm this? And also what it means for RISE and also your R&D outlook?

On portfolio, how do we progress? Let's put it that way. Between Safran Passenger Innovation and EasyAir, we are talking about a revenue of roughly EUR 0.5 billion, more or less, roughly. It's an indication. So how -- what does it mean in terms of percentage of the ex Zodiac portfolio progress? It's a few points, I would say. When we met at the Capital Market Day, basically, we had executed 10% for a target of 30% of the portfolio. I guess I should not -- we should not be far from 15%, but it's indicative. We may come back on that, but it's an indicative number. So there's more to come. We hopefully will progress in 2026. But I will say the obvious. Before launching a process of divesting an asset, we need to make sure that this asset has some kind of appeal to the market. And so this is why we are focused on the performance and economic recovery first. But we are planning to continue to divest, especially in the course of 2026.

On your second question about FX, true, we took the assumption of $1.15 per euro on the spot rate just because we built up our 2026 budget at the time, it was at $1.15. So now it's $1.18. So that means a slight negative. It will only impact negatively our revenue base. You know the sensitivity, it's about EUR 100 million, EUR 150 million of sales per cent spot rate.

So we'll see with time, we could have chosen 1.20. It would be as long as 115. We'll see at year-end. And then your last question is about the RISE program. RISE is a technology program. We are developing technology bricks, new materials, gearbox, an open fan architecture, hybridization that we leave all options open. So there is nothing new in what you may have seen in some press reports about a ducted engine or an open fan engine.

Yes. I'll say the obvious as well. We are getting prepared to any scenario because at the end of the day, it's going to be an airframer decision to select a given engine architecture. So basically, RISE, as just Pascal has reminded, is a technology program. There's a lot of common bricks that basically we develop whatever the architecture is. And yes, indeed, we are working on an open fan architecture. But again, we need to be prepared to any scenario. We are still very confident that the open fan is, let's say, the most, let's say, rewarding, let's say, configuration in terms of fuel burn. There's, of course, a lot of challenges that we need to meet and need to tick boxes, if you wish, on this technology plan. But again, we need to be prepared to any scenario. So no surprise.

We'll take 2 more questions.

Next question is from the line of Rory Smith, Oxcap.

You've given lots of color on the call so far about narrow-body engines. So that's very helpful. I just had a question on wide-body. Is it fair to assume that there's a similar sort of margin differential between, let's say, timing materials or spare parts versus services under wide-body service contracts, as you mentioned for under LEAP? That's my first question.

To the wide-body, I would say yes, Rory? Yes, indeed. similar.

Brilliant. And then just as a follow-up to that, is there anything you can tell us this morning just about this sort of engine durability issue. I'm not saying it's your component, but anything that you're hearing from your partner there that Boeing talked about on their 4Q call that may be impacting the flight test program for 777X.

Well, I cannot comment on that, Rory. Sorry for that. That is the last question?

Yes, of course. Last question today is from Ken Herbert RBC CM.

Two questions, if I could. First, you grew spare parts in civil engines about 18% in '25. The guide is for mid-teens growth this year with looks like basically flattish CFM56 shop visits and some growth on the LEAP. Can you just help dissect that a bit and why the slower growth? Is it anything in underlying assumptions on price or work scope or maybe wide-body versus narrow-body as a first question. And then second, we are starting to hear some concern -- not concerned questions from some of the larger CFM56-7B fleets about maybe lowering engine inventory levels this year as we go through the year. And I'm just curious if you can comment on that, if that's anything you've seen and how we should think about that?

Okay. I'll take the first one on spare parts for 2026. So we are guiding to a mid-teens revenue growth. It's driven by the 3 engine families. First one, CFM56, we should see more or less a flattish number of shop visits. So volume is flat. Price will be up. It's still to be agreed with our partner. It will be applicable from 1st of August. We will benefit from last year price increase in the catalog list price, which was mid- to high single digits.

And then work scope. W scope should be a positive because as we saw in 2025, we're expecting a higher proportion of full work scope within the total of shop visits. So CFM56 will continue to be a driver. On the IRS engines, as you know, we have a minority stake on the GE engines. And here, we see good positive drivers as well in terms of pricing and volume and work scope on all 3 components.

And then on LEAP, we'll continue to grow the number of shop visits for the LEAP, as we say globally from about 15% shop visit per formed by third parties to 30% by 2030 and with a favorable mix over time, meaning less quick turns and more full performance restoration shop visits. So that should benefit as well our guidance for spare parts in 2026. I would like to say right now, then what we will discuss in April, we should have a very strong start in spare parts in Q1 only because we have favorable comparison base. So you should expect a higher number than the mid-teens when we publish our Q1 numbers.

Ken, on your second question, I'm not sure what you are referring to. But what I can say is even if our overall performance has been extremely good on spare parts, especially CFM56 spare parts in the course of 2025. We have been a little bit constrained by some supply chain issues that are getting unlocked. And that's also what is going to be a component to feed 2026. So we see, let's say, supply chain, let's say, some supply chain bottlenecks getting unlocked on CFM56 spare parts as well, and that's going to help us in 2026.

Thank you all. Have a good day, and happy Valentine for tomorrow.

Thank you.

Thank you. This concludes today's conference call. Thank you for participating, and you may now disconnect.

Welcome to the Safran Third Quarter 2025 revenue.

At this time, I would like to turn the conference over to your host, Olivier Andries, Safran's CEO; and Pascal Bantegnie, Group CFO. Mr. Andries, please go ahead.

Good morning, everyone. Thank you for joining us for Safran's Third Quarter 2025 call. I'm here with Pascal. Let us start with the key highlights of the quarter. Safran delivered another strong performance in Q3 with high teens growth driven by increased volume and services. Adjusted sales reached EUR 7.9 billion. Civil aftermarket remained robust, reflecting continued demand from airlines. Spare parts for civil engines were up 16%, largely thanks to CFM56, while services grew by 24%, supported by LEAP rate per flight hour contract.

Regarding LEAP engine deliveries, output has improved quarter after quarter this year. After a slow start, we have been able to catch up on delays. And in Q3, we reached a new record with over 500 LEAP engines delivered, up 40% year-on-year and 25% from the previous quarter. Over the first 9 months of the year, we have delivered a total of 1,240 LEAP engines, a 21% increase compared to last year. These strong results also reflect continued improvements across our supply chain.

In addition to the strong operational results, we are excited about our recent acquisition of the actuation and flight control activities from Collins finalized at the end of July. The strategic move has already contributed to our Q3 performance. Integration is off to a great start and our teams are fully engaged and focused on unlocking cost synergies and new commercial opportunities. We are confident that this acquisition will be a strong driver for Safran's future performance.

Looking at the year-to-date picture, adjusted revenue for the first 9 months amounted to EUR 22.6 billion, up 15% organically, confirming a strong growth trajectory across all divisions. Based on this performance, we are upgrading our full year 2025 outlook on all metrics.

Turning to Slide 4. Let me highlight some of our key business achievements this quarter. Last week in Morocco, we broke ground on the new LEAP MRO facility and announced the launch of a new LEAP-1A assembly line in Casablanca. This expansion strengthens our global industrial footprint and will support the sustained ramp-up of the LEAP engine deliveries in the years ahead with a capacity to assemble up to 350 engines per year.

In Defense, Safran and Rheinmetall signed a framework agreement to jointly develop advanced Defense solutions, combining our expertise in electronics, navigation system environment, and atomic clocks, time servers with Rheinmetall's land defense capabilities.

At the 2025 Defense Security Equipment International Show in London, Safran unveiled its next-generation infrared binoculars, setting new standards for technical observation and situation awareness. Lastly, in Poland, Safran and PGZ entered in a strategic defense partnership to foster local industrial cooperation and innovation. The agreement covers industrial cooperation on the HAMMER Precision Munition and the local production of GEONYX Navigation System with PGZ.

Let me now hand over to Pascal for more details on Q3 sales.

Thank you, Olivier. Good morning all. A few words to start with on FX as usual. After a sharp rise in the first part of the year, the euro-dollar stabilized around $1.15 to $1.17 since early July. Our hedging portfolio has remained fully protected so far with no deactivations to date. The team is continuing to hedge our 2029 exposure at very good rates. Our 2025 hedge rate is confirmed at $1.12 per euro, and the hedge book now totals $54 billion as of end September, unchanged from the end of June. Overall, our approach to FX risk has kept us well protected, ensuring attractive hedge rates and supporting Safran's competitiveness in a challenging market environment.

Turning to Slide 7. Q3 revenue reached EUR 7.9 billion, up 18% year-over-year. The currency impact was a negative EUR 300 million, mainly reflecting the euro appreciation against the U.S. dollar with an average spot rate of $1.17 in Q3 compared to $1.10 last year. Scope largely offset the negative currency impact, contributing EUR 300 million, primarily driven by 2 months consolidation of the actuation and flight control activities acquired from Collins. In total, the group generated over EUR 1.2 billion in additional organic revenue versus last year, fueled by growth in every division with Propulsion leading the way.

And on Slide 8, let me now provide a few details per activity. Propulsion revenue reached EUR 4 billion, up 26%. Civil OE grew strongly. Q3 was a record quarter with 511 LEAP engines delivered, up 40% year-over-year and up 25% sequentially. Civil aftermarket remained very dynamic with spare parts up 16%, mainly driven by CFM56 and high-thrust engines, both of them benefiting from sustained volumes and higher work scope. CFM56 gross prices were up mid- to high single-digits in August. LEAP also contributed positively over the period.

In the first 9 months, spare part sales were up 19.5% at the top end of our guidance. Services were up 24%, mainly driven by LEAP RPFH contracts, but also high-thrust engines service contracts. Over 9 months, services increased by 22.2% beyond our guidance. But as you know, it has no additional EBIT impact given our profit recognition methodology.

Military engine revenue declined year-over-year, notably due to a softer level of aftermarket activity and slightly fewer M88 deliveries to end customers. Equipment & Defense revenue increased by 12% to EUR 3 billion with both OE and aftermarket growing at a similar pace. Higher OE sales were fueled by aircraft ramp-up, driving increased demand for landing gear, electrical and power system, nacelles and avionics. Defense also continued to benefit from strong momentum, especially in the guided-bond HAMMER, missile seekers, navigation and timing systems.

Services continued to perform well, supported by strong air traffic levels, which resulted into ongoing demand, in particular for landing system, electrical system and nacelles. Aircraft Interiors posted revenue of EUR 800 million, up 10%. OE sales increased by 12%, supported by steady growth in the Cabin business, benefiting from aircraft ramp-up. Business class seat deliveries, however, faced headwinds from certification, which remains a key challenge in the sector. Services were up 7%, driven by Cabin activities with very good momentum in Middle East and Asia.

A few additional points on Slide 9. First, on the share buyback program. As of October 17, we hold approximately 5.1 million treasury shares designated for cancellation, and we are currently finalizing the ongoing EUR 500 million tranche, which will be completed by December 5. All these shares representing a total of EUR 1.4 billion will be canceled by the end of 2025.

Some update on the tariff environment. Now that bilateral agreements have been negotiated, we are better positioned to assess and manage the risk associated with tariff. The agreement between the U.S. and the EU as well as the eligibility of our products under the USMCA regime have significantly reduced the amount at stake. In this fluid environment, Safran remains agile and actively continues to implement mitigation measures and commercial actions. Nonetheless, a residual impact remains primarily related to flows between China and the U.S., what we call Section 232 on aluminum, steel, copper, or products which are not eligible under bilateral agreements.

So the net impact on the recurring operating income, which is now included in the full year 2025 outlook, is expected to be a negative EUR 100 million to EUR 150 million in 2025.

Olivier, back to you.

Thank you, Pascal. So based on the strong performance over the first 9 months, we are upgrading our full year 2025 outlook on all metrics. Revenue should increase by 11% to 13%. Recurring operating income guidance is improved by EUR 100 million at midpoint and now includes the expected net tariff impact, as Pascal just commented. Free cash flow guidance is improved by EUR 100 million at midpoint, reflecting the improved business performance.

Two of our main assumptions are updated. LEAP engine deliveries are now expected to increase by more than 20% versus 2024. And with increased activity in LEAP, maintenance services are now expected to grow by low to mid-20s with no additional EBIT associated due to our specific profit recognition methodology. In addition to this outlook, the Collins flight control and actuation activity should contribute at around EUR 650 million of revenue with a mid-single-digit recurring operating margin before separation and integration costs.

Overall, Safran remains on track to deliver another year of profitable growth and robust cash generation supported by healthy demand, solid execution and the resilience of our portfolio.

Thank you. We will now answer your questions.

[Operator Instructions] We will now take our first question. This is from Christophe Menard from Deutsche Bank.

I had 2 actually. The first one is on the guidance upgrade on the EBIT. Now that you include the tariffs, it means we have the equivalent of a EUR 200 million incremental improvement. Where is this coming from? Is it essentially spares? Can you elaborate?

The second one is on Morocco. You're talking about an increase in production capacity. Is it enough for you to reach rate 75 in 2027? Or do you need further investment?

Christophe, I'll take the first one. Indeed, we raised our guidance by EUR 100 million. But as it takes now into account the EUR 100 million to EUR 150 million impact from tariffs, the underlying performance is a raise of EUR 200 million to EUR 250 million. It's coming primarily from the spare sales. You can see that at the end of the first 9 months, we are at the high end of our guidance, which is mid- to high 20s for spare part sales at 19.5%. To be frank, we could have been more positive at the end of July. But at that time, we didn't have such clarity on tariff. So now that the dust has settled, it's easier for us to mitigate the impact and quantify the impact. So this is the 2 reasons why we can raise today the guidance.

Christophe, for your second question relating to Morocco, this investment is allowing us to meet the high rates requested by our Airframer customers relating to the assembly of the engines. So we have to look at it holistically between the assembly capacity, let's say, from our partner, GE, and our own assembly capacity. But indeed, this new investment allows us to meet, let's say, the rate increase -- the high rate increase for the assembly.

But the assembly is just the tip of the iceberg, because in order to meet rates whatever, 75 or so, if you speak about Airbus, but Boeing has also high rates increase as well and also COMAC is willing to increase. So we have to look at the global picture, which is encompassing forging, casting, machining, special processes. So once again, the assembly is just the tip of the iceberg.

We'll now take the next question. And this is from Benjamin Heelan, Bank of America.

The first question is on aftermarket. And clearly, very strong trends through the year. And your partner, GE, gave some building blocks for 2026 on their call earlier this week. I was just wondering, are there any building blocks that you can provide that the mix is obviously very similar, but there's also some differences how we can think about aftermarket growth and any building blocks you can provide at this point into next year?

My second question is free cash flow. You've obviously had guidance upgrades pretty much all through the year. They have been quite material. And I think when I look at what you've done in '24, I look at what you've done in '25, it's clearly extremely difficult for you to be as low as what you guided at your Capital Markets Day for your 2024 to 2028 sort of cumulative free cash flow. So how are you thinking about the medium-term guidance here. You're clearly running well ahead of it. And when can we expect an update there?

And then my final question is, obviously, you've owned Collins for a couple of months now. Just any comments in terms of how it's performing, what you see? And now that Collins is done, where is next from an M&A perspective? Or are you broadly happy with the portfolio as it is today?

Okay. So I guess your first 2 questions relate to either the 2026 outlook or the 2028 ambition. At this point in time, now our midterm plan is ready. What we need to do is to compile our midterm plan with the Collins contribution. We acquired this company late July. August, as you know, is not a busy month at least here in France. So we need some more time to compile all this data. So we'll come back in Feb, obviously, with the '25 results with the guidance for 2026, notably on aftermarket. And we'll discuss our first EBIT target for 2028 and our accumulated free cash flow.

I would again agree with the comments you made that we are clearly on the upside, notably on aftermarket. And I guess we can now say that we share a similar view with GE on the CFM spare parts momentum -- CFM56 spare parts momentum that they disclosed mid of July. But we need to quantify the impact at Safran level and come back to you next Feb.

Ben, on Collins, I can tell you that the teams are enthusiastic. The ex-Collins teams, now Safran, in the U.K., in France and Italy are enthusiastic to join Safran. They are on board our strategy. They are very pleased to see that we have a strategy going forward with respect to flight controls and the preparation for the next single aisle. Our integration team is fully engaged to get in the time line that we've committed to, the cost synergies that we can draw from the various activities. And we have engaged in that.

Typically, our team from the nacelles business have started to connect with our new actuation and flight control teams, same for our landing system teams, same for our aero system teams. So basically, we are fully engaged.

What is next? As we have always said, M&A is opportunistic. But to be very clear on the equipment side, I think we have made most of our moves. We have quietened our spectrum of activities in safety critical equipment. So I don't expect that there is going to be a significant further move on the equipment side. As we said, we stay ready for, let's say, some bolt-on acquisitions, especially in defense, which is a strong area of growth.

Next question is from Chloe Lemarie from Jefferies.

I have the first one on the LEAP assembly line in Morocco. I was wondering how quickly it would ramp because I was under the impression it would start operation in 2028. So wondering how long it would take to reach the 350 engine per year mentioned in the press release. Also with this announcement, does that mean that you have finalized discussions with Airbus on the ramp-up to rate 75.

My second question was actually on Seats. We've obviously seen challenges in certification for a while in the industry now. So I was wondering if it affected in any way what you see as the potential margin for the business? And in turn, if it affected your view of how core this business is for Safran?

Chloe, on the LEAP assembly line, we've said that the first assembled engine would be beginning of 2028, if I remember well. So it's 2028, and we will ramp up, let's say, we are not going to reach 350 in a matter of months for sure. But I expect that the 350 can be reached by 2030 or so. So this is for Morocco.

Typically, here, our assembly line in Villaroche in France will account for about 65% of our, let's say, global assembly capacity. And Morocco, plus we have a tiny small assembly capacity in Mexico as well to deliver engines to Mobile, Alabama. So Morocco plus Mexico would account for 35%, roughly.

At 75, we have, let's say, an aligned view with Airbus on basically 2026 and 2027. We have engaged in discussion for the rate 75. And so the discussions are ongoing at the moment.

On Seats, this is an area where we had many, many challenges. We have tackled the development challenges. So now the development process is really under control. We have addressed the supply chain issues. Here as well, it has improved significantly. This is an area where we probably were a little bit too shy, if I may say, on extracting the value of our seat business. And so we've significantly improved our price on the, let's say, most recent wins that we have obtained. This will materialize in the EBIT in 2 years from now. But the pricing is obviously a key element of the, let's say, financial recovery of the seat business. And we are still facing some certification challenges, which is an industry-wide challenge on certification. That's where we are.

Chloe, part of your question, is it still a core business? It is. We have not changed our mind compared to the view we shared at the Capital Market Day in 2021. We said that 30% of the former Zodiac activities were noncore. We have already divested some of them. We may divest more in the future, but Seats is not part of our divestment process.

Next question is from Ross Law, Morgan Stanley.

Just to come back on LEAP rates. You just mentioned that you're aligned with Airbus for rates for 2026 and '27, but still in discussions for rate 75. Does that mean that rate 75 could only be achieved beyond 2027 from a Safran perspective?

Second one on LEAP again, just in terms of the engine catch-up, you previously said you aim to fully catch up by the end of October, so a few days' time. Given this obviously strong delivery numbers in the third quarter, is that still on track?

And then last one, if I may, just on tariffs. So you've quantified the number or the impact for 2025 at EUR 100 million to EUR 150 million. But this, of course, only applies to a portion of the year. So should we extrapolate this run rate into 2026 until the trade deal is finalized?

Ross, on your first question, what can I say? Rate 75 is under discussion. But it's not -- I have not -- to my knowledge, I mean, Airbus has not said that rate 75 would be fully reached full year in 2027, to be very clear. So there should be no misunderstanding here. So yes, we have, let's say, a joint vision on the number of engines we need for 2026, 2027, and we are discussing now 2028 and going forward. Are we going to catch up this year? I'm confident we will. We had a very strong Q3. I don't see any reason why Q4 should be different than Q3. This is why we have raised our guidance of deliveries of LEAP for the full year. And so if we continue on this rate of weekly deliveries to Airbus, we will catch up by end of October, beginning of November, as we said. So I am confident in that respect. I will let Pascal answer on the tariff.

Ross, as you said in 2025, the tariff story was a bit strange, because we had no tariff paid in Q1. Then starting from April, we had different rates between EU and U.S., China and U.S., Mexico, Canada and U.S. So before we have the bilateral agreements being announced and now signed, we were lacking clarity. So to answer your question, going forward for '26 up to 2030, if I may, I would expect, given what we know today, because this may change, this is still a fluid environment, the net impact to be no more than EUR 100 million per year on EBIT, okay? So I would say, again, EUR 80 million, EUR 100 million could be the right range to think of.

Next question is from Ken Herbert from RBCCM.

Yes, I wanted to first ask on the CFM56. Can you comment on, across the network, how much improvement you've seen this year in turnaround times for that engine and specifically on the aftermarket? And specifically, when you think you might get back to 2018, 2019 pre-pandemic levels in terms of turnaround time?

And then my second question is for the spare parts guidance this year, can you just remind us how much of that is price versus volume versus work scope for the guide on the parts?

Ken, most of the shops today are dealing with CFM56 and LEAP. What is mainly driving the turnaround time are the 2 following elements. One is the overall maintenance capacity. And in fact, on a worldwide basis, especially in the CFM network, we were short of capacity. So this is why we are on a significant ramp-up of our maintenance capacity and the same for our partner, GE. So this is one.

And the second key element is basically the availability of parts. So those are the key drivers of the turnaround time. So because the pressure is very high, both on the maintenance capacity and on spare parts -- on parts globally, because we have to feed the OE side as well as the aftermarket side, the turnaround time is not the same as the one we enjoyed pre-COVID. So on the CFM56, talking about Safran at least, our current turnaround time is around 100 days, which is above, let's say, the typical turnaround time we had before COVID, which was more closer to 70 days. So that's where we are today on CFM56.

On LEAP, the turnaround time is higher, but as always, this is the beginning of the journey on the LEAP. But we are on a strong trajectory to decrease the turnaround time on LEAP globally this year compared to last year, and we'll make more progress even next year. Today, the turnaround time on LEAP is, let's say, our target is 130 days. And basically, we are on trajectory to go down to 100 days in the next 1 or 2 years.

Okay. On your second question on the spare parts momentum. You know there are 3 components within our spare parts index, high-thrust engines, LEAP engine and CFM56. The largest positive surprise we had so far this year is coming from the high-thrust engines. You know that we have a minority stake on all GE engines. And we do benefit from strong volume and heavier work scope that we initially anticipated. So that was the first good news so far this year. On LEAP, I would say, slightly better than we had expected, but not far from our initial expectation. And then on CFM56, if I break down volume, it's mid-single-digit growth, as we've said since early this year.

On pricing, we both benefit from the price increase we had in August 2024 in the high single-digit range. And we also benefit now from the mid- to high single-digit range price increase that we had in August 2025. And the good news is coming as well from the work scope, which is higher than what we had expected. So altogether, this is why we have consistently and continuously increased our assumption for spare parts starting the year with high single-digit plus. Now the guidance is mid- to high teens. And as I said, we are at the end of the first 9 months at 19.5%.

We'll now take our next question. This is from Sam Burgess, Goldman Sachs.

Clearly, very strong growth in services over the quarter. I know you can't quantify this exactly, but can you just give us a sense of the overall proportion of LEAP RPFH within the services revenue mix? And broadly, how should we think about margin there across services relative to spare parts? Is lower but improving the right way to frame it? And a second question, if I may, is there anything we should be aware of that may put pressure on the implied exit rate margin going into 2026?

On your first question, LEAP RPFH is the vast majority of our services revenues. Growth is coming from -- as we recognize revenues as per the cost, it means that we have more cost on these contracts, which is no good news. In fact, the reason behind that is that we have a different mix within our LEAP RPFH contracts today. We were performing a lot of what we call quick turns. So low-value shop visits. And now there are more shop visits in the mix, so performance restoration shop visits in the mix than quick turns compared to what we had anticipated, meaning more cost, meaning more revenue. So this is why we upped our assumption to low to mid-20s.

But by construction, it has no EBIT benefit, because we know from the beginning of the year, the value of EBIT we will recognize under our LEAP RPFH contracts, because as we have disclosed and discussed at the Capital Markets Day, we have a profit recognition methodology, which is fixed, whatever the revenue level is. So no EBIT contribution from this upgrade in our assumption. And what was, sorry, your second question, again?

Yes, sorry, the second question was, just going into 2026, is there anything we should be aware of that may put pressure on the implied exit rate margin given your new EBIT guide?

Sorry, I'm not sure I got your question, Sam.

Is there anything we should be aware of for...

Is your question on FX or not?

No, on margin, whether there's anything that could put pressure on margin going into '26 that we should be aware of?

Okay. You mean globally or on Propulsion?

No, in terms of group.

Well, we will guide in Feb for 2026. But our view is that if I take businesses by businesses, starting maybe with Aircraft Interiors, our intent is to improve the operating margin by more or less 200 basis points each and every year if we want to be at 10% by 2028, which was what we discussed at the Capital Markets Day. Then in Equipment & Defense, I would say before Collins, because we have still to evaluate the Collins impact. As you know, it will be dilutive in the first year. But before the Collins contribution, our target is to be at 15% in 2028. And we were last year at 12.2%. This year, we expect to improve by at least 50 basis points our margin in Equipment & Defense, and we should continue to grow next year.

And in Propulsion, we posted a very strong H1 at, I guess, was north of 23%. I remember that we said that the margin should improve by more or less 250 basis points this year. I would maybe revise slightly down this expectation given that we have higher services. As you see, we are up our assumption, and it comes with no EBIT, as I just said. And we will also increase LEAP deliveries, meaning more revenues, but all that is coming at a loss. So in Propulsion, I would say, 200 to 250 basis points, but maybe on the low side of that range. So going forward, the key point will be on Propulsion, and we will discuss that in 2026. It's a bit early to tell.

We'll now take the next question. And this is from Olivier Brochet from Rothschild.

I would ask 2 questions, please. In the newspapers a few weeks ago, there were discussions about potential disposals that you could be doing in Interiors. I don't know if you can comment about that. But if you're doing these disposals, what will you be doing with the cash, please? And the second question is on the tariff impact on free cash flow. If you could give us a sense of how this would play out in 2025, 2026 compared to the impact that you give for operating income, please?

Olivier, we will not comment specifically on basically those articles and those disposals. I will only reiterate what we've said back in 2021 and again at our Capital Markets Day in 2024, we intend to sell and dispose about 30% of the Zodiac -- ex-Zodiac portfolio. The majority of this perimeter is going to relate to Interiors, the majority. Now we've also said that we wish, we want to recover, let's say, the performance, the operational and financial performance of those activities before starting the process of disposal. And we are on that path.

Olivier, on your question, it's a good question on the free cash associated with tariffs. On the EBIT side, so as I said, there's a net impact of negative EUR 100 million to EUR 150 million in '25. The cash impact is higher than that for 2 very simple reasons. First, we have put in place what we call a duty drawback mechanism, by which if you apply, you can get your cash back in some circumstances, but it will take time from the CBP to reimburse you. So part of what we see in EBIT in '25 will be cash back only in '26 and so on.

And then as you know, we are -- part of the mitigation actions is to take commercial actions with customers, meaning invoicing customers for the tariff surplus. And here, again, there is a cycle for cash collection from our customers. So you would assume that the cash impact in 2025 is higher than the EBIT impact that we have disclosed.

That's helpful. If I can go back on the disposals. My point was not so much whether you will do them or not. It was more on the use of the cash. Is this something that shareholders should think of as reinvested in the business, reinvested in external growth, or effectively as shareholder distribution?

Well, it depends on the size of the disposal. If we are talking of a few hundred million euros, or if we are talking of more than EUR 1 billion, depending of what we can achieve or not. At this point in time, I guess we have a friendly approach to shareholders in terms of dividend and share buyback. So we need to execute on that. Now on M&A, as Olivier said before, it is always opportunistic because we don't know what kind of companies will come for sale. So we'll see with time. So we will consider what will be the cash use once we have finalized the divestments.

We have one more question. This is from Ian Douglas-Pennant from UBS.

Ian at UBS. Firstly, just a quick one on currency. Could you just remind us of the translational impact here? So your guidance assumes 110 and we're obviously a little off that point today. So just -- I know you hedge, but what's the translation impact, please?

And then secondly, could you help us understand, are you still expecting a kind of fade in the market environment that you're seeing in Q4, which results in weaker revenue growth and weaker profit growth in Q4 as implied in your guidance. Can you just help us understand what the kind of offsets are there, please?

On your first question, to provide clarity on the translation effect. First, in terms of sensitivity, $0.01 of FX change has more or less EUR 150 million of impact on revenues either way. We built our initial guidance at $1.10. What matters is the average spot rate over the full year. Year-to-date, despite the fact that we went up to $1.17, even $1.18 at some point in time, on average, year-to-date, it's $1.12. If we assume that Q4 will remain at $1.16 for the full quarter, then you would assume that the full year average spot rate will be more or less at $1.13, okay? So $0.03 difference from our initial expectation, which means no more than EUR 0.5 billion of a negative impact on the full year sales, okay?

Then on your Q4 question, yes, lower growth than what we had in the first 9 months, but it's simply because of the comparison base, which was quite high last year. I don't see anything specific other than that.

We have no further questions. So I would hand back to the speakers for any closing comments.

Okay. Thank you for your attention.

And have a good day.

Have a good day. Bye-bye.

Bye-bye.

Thank you. This concludes today's conference call. Thank you for participating, and you may now disconnect.