Safran : 2021 Integrated report

SAFRAN AT A GLANCE

2021 KEY FIGURES

3rd

global aerospace group, excluding airframers*

€15,257 million

REVENUE(1)

down 7.5% (down 5.4% on organic basis) on 2020

OUR ACTIVITIES

€7,439 million

REVENUE(1)

€1,342 million

RECURRING OPERATING INCOME(1)

AEROSPACE PROPULSION

18.0%

RECURRING OPERATING MARGIN(1)

€1,805 million

INTEGRATED REPORT

Safran at a glance 1

Editorial 2

Group profile 4

Ecosystem 10

Strategy and business model 16

Risk management 36

Corporate governance 38

Key indicators 46

Front cover:

"Mimesis, nature inspiring technology", images from the photo contest organized by Safran and Wipplay.

RECURRING OPERATING INCOME(1) up 7.1% (up 8.4% on organic basis) on 2020

€1,680 million

FREE CASH FLOW up 57% on 2020

Long-term credit rating:

BBB+ with stable outlook (Standard & Poor's)

€1,544 million

NET DEBT

€1,430 million

TOTAL R&D

(including customer-funded R&D)

€387 million

CAPEX

* (1)Classification criteria: revenue - Source: Safran.

Adjusted data. See section 2.1.1 of the 2021 Universal Registration Document for a reconciliation of the consolidated income statement with the adjusted income statement and a breakdown of the adjustment.

EQUIPMENT & DEFENSEAIRCRAFT INTERIORS

76,765

EMPLOYEES

€6,325 million

REVENUE(1)

€650 million

RECURRING OPERATING INCOME(1)

10.3%

RECURRING OPERATING MARGIN(1)

€1,475 million

REVENUE(1)

€(167) million

RECURRING OPERATING INCOME(1)

(11.3)%

RECURRING OPERATING MARGIN(1)

(at December 31, 2021)

1

EDITORIAL

Message from the Chairman of the Board of Directors and the Chief Executive Officer

"Safran's business model is anchored on solid foundations and strong leadership positions. Safran is rebounding from the Covid-19 crisis with strong profitable growth at the forefront of sustainable aviation. The Board of Directors is fully aware of the strategic importance of the climate challenge, and will be working with the Director responsible for monitoring climate issues to ensure the Group achieves its climate roadmap."

2021 was an important year for Safran, marked by significant operational and financial progress.

As the market recovers from its low point in the first quarter, Safran delivered solid margin and cash performances in 2021, exceeding the forecasts made one year previously.

We generated robust commercial orders across our businesses and gained traction from Rafale export programs.

Our performance in 2021 reflects a transition year before the anticipated recovery in 2022. The ongoing implementation of our adaptation plan has enabled the Group to mitigate the economic impact of the crisis and lower our breakeven point by optimizing our industrial footprint, adjusting our workforce, reducing our operating costs and controlling our investments.

The crisis has not stopped us planning for, and investing strongly in, the future to maintain our position as a benchmark in our markets.

In the short term, our main challenge will be to increase production rates in line with the return to growth in air traffic, against a backdrop of tensions in the supply chain and the job market and shortages of certain components and raw materials.

After adjusting our workforce for more than a year, recruitment picked up strongly from the third quarter of 2021. We recruited a total of 8,000 people in 2021, notably internationally, and we plan to recruit 12,000 people per year over the next few years, including around 3,000 in France - which will support considerable growth in our workforce.

Another, longer-term challenge is the decarbonization of aviation, to which we are firmly committed, with two main axes. The first relates to technologies for achieving the industry's collective goal of carbon neutrality by 2050.

Our roadmap is clear. Work is progressing on ultra-optimized propulsion for future engine generations through our RISE technology program, which is targeting a more than 20% reduction in engine emissions by 2035 compared to today's most efficient engines, and will be compatible with 100% sustainable aviation fuel and hydrogen.

The second axis relates to the low-carbon project launched in late 2018, targeting CO2 emissions reduction at our production sites. Here too, we have set the ambitious target of a 30% reduction by 2025 and 50% by 2030, in line with the 1.5°C trajectory.

Safran is well placed to benefit from the positive trends in both aftermarket and original equipment as narrowbody traffic returns, we expect, to pre-crisis levels by the end of 2022.

On that basis, Safran has published financial objectives for 2022 that reflect our confidence in a strong recovery and show very significant increases in all our

"The strong commitment of our employees from the outset of the Covid-19 crisis has enabled Safran to demonstrate agility, resilience and discipline. The Group will leverage its operational excellence, notably through accelerated digitalization and a leaner organization, to deliver increased profitability and manage the forthcoming ramp-up in OE build rates and services. We are stepping up investments to reach the goal of carbon neutrality by 2050."

OLIVIER ANDRIÈS

CHIEF EXECUTIVE OFFICER

business and investment indicators. We also intend to continue reinvesting capital from divested activities into complementary bolt-on acquisitions with growth potential.

The financial objectives do not take into account the impacts of the Russo-Ukrainian conflict, which are under review. The recent sanctions decided against Russia by the US and European authorities apply to all aerospace activities and products. In compliance with these decisions, Safran has suspended all exports and product and service deliveries to Russia and halted its manufacturing joint ventures' operations in the country until further notice.

With geopolitical tension accentuating the importance of self-reliance, Safran will strive to strengthen and protect our sovereign technologies in defense and space, and with our strategic suppliers.

From a longer-term perspective, Safran is well positioned to meet accelerating trends in the aerospace industry thanks to its global leadership positions, unique technology portfolio, operational excellence, strong employee engagement and solid financials.

We would like to thank you for your trust and hope you enjoy reading this report.

Regards,

Ross McInnes and Olivier Andriès

Safran: a comprehensive offering

Present across the whole aircraft, Safran aims to build the future of the global aerospace sector and be the preferred partner of airframers and airlines.

Safran products have common features that contribute to the resilience of its business model: its position as a tier-one supplier to airframers and airlines, high technology content and leadership positions in its main business segments.

A fully-fledged engine manufacturer(1), Safran supplies airframers with engines for commercial aircraft, military aircraft, regional transport aircraft, business jets and helicopters.

To increase cost efficiency and share risks, engine manufacturers often develop their engine programs in partnership. Safran has primarily partnered with GE since the 1970s, when they set up the 50-50 joint venture CFM International that develops the CFM56® and LEAP® engines. The partnership has been extended through to 2050. Safran also contributes to access to space through its 50% stake in the ArianeGroup joint venture, the prime contractor for the Ariane 5 and Ariane 6 launchers.

Safran supplies a wide range of aircraft equipment including landing and braking systems, nacelles and related electrical systems and engineering solutions. Aerosystems: Safran is one of the world's leading players in aerosystems, supplying equipment that provides essential aircraft functions and aircraft safety: safety systems (evacuation slides, oxygen masks, etc.); cockpit systems; and fluid management systems (fuel, pneumatic and hydraulic circuits). Defense: Safran provides solutions and services in optronics, avionics, navigation systems, tactical drones, electronics and critical software for civil and defense markets.

To ensure passenger safety and optimize comfort, Safran develops cabin interiors

(overhead bins, lavatories, galley and catering equipment, etc.), passenger and crew seats, water and waste management systems, in-flight entertainment systems (RAVE™), and interior retrofit for commercial aircraft. The aircraft interiors business addresses both airframers (under the SFE(2) model) and airlines (BFE(3) model).

• (1) A full-fledged engine manufacturer is present in all engine components and all propulsion market segments.

• (2) Supplier Furnished Equipment: equipment specified and purchased by the airframer.

• (3) Buyer Furnished Equipment: equipment specified and purchased by the airline.

LEADERSHIP POSITIONS

IN ITS MAIN BUSINESS SEGMENTS (source: Safran)

A leading global player

Since its creation in 2005, Safran has expanded internationally, with around 76,800 employees in 27 countries.

LEVERAGING ITS GLOBAL FOOTPRINT, SAFRAN ESTABLISHES STRONG

AND SUSTAINABLE RELATIONSHIPS WITH THE MAJORITY OF AEROSPACE PLAYERS AND AIRLINES, REFLECTING ITS DESIRE TO SUPPLY ITS CUSTOMERS PROMPTLY FROM LOCAL BASES.

GEOGRAPHIC SPREAD

OF EMPLOYEES AND SITES AT END-2021(1)

-

Percentage of employees % of employees in the total Group workforce

Number of sites(2)

R&D and production activities

(1) Illustration of the countries where the sites of Safran's consolidated companies were located at December 31, 2021. Further to the sanctions decided against Russia by the US and European authorities, Safran has suspended all exports and services to Russia and halted its manufacturing joint ventures' operations in the country until further notice.

(2)Each site corresponds to a legal entity covering one or more tertiary, production, service or maintenance sites.

Service and maintenance activitiesCommercial and administrative activities