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France's Safran posts higher H1 profit despite supply chain woes

France's Safran posts higher H1 profit despite supply chain woes

Reuters · 07/28/2022 01:00
France's Safran posts higher H1 profit despite supply chain woes

- French jet engine maker Safran SAFRY posted higher first-half earnings and raised some forecasts as airlines bought more spare parts to serve a recovery in air travel - but acknowledged fragile supply chains were causing problems in its factories.

The world's third largest aerospace contractor, whose products range from wheels to wiring, and commercial engines to thrusters for satellites, said recurring operating profit rose 59% to 1.047 billion euros ($1.1 billion) as revenue rose 24% to 8.56 billion.

It upped full-year forecasts for revenue to 18-2-18.4 billion euros from 18.0-18.2 billion and for free cashflow to 2.4 billion euros from 2.0 billion. First-half free cashflow more than doubled to 1.665 billion euros as advances poured in for Rafale fighters, for which Safran builds the M88 engines.

Together with General Electric GE, Safran co-owns the world's largest civil jet engine maker by the of units sold, CFM International, which supplies Airbus and Boeing. Both planemakers are receiving fewer engines than planned this year.

"Our ability to ramp up production rates is somewhat constrained by a fragile supply chain as the world emerges from the pandemic and we are working hard to ensure timely delivery to airframers," Safran Chief Executive Olivier Andries said.

Safran is also cutting costs to counter inflation.

The widely watched civil aftermarket - or demand for spare parts and services - rose 47% in dollar terms in the first half.

That is mainly the result of demand for spare parts for the CFM56, the predecessor to the LEAP engine which powers all Boeing 737 MAX and about half of the Airbus A320neo fleet for which CFM competes with Pratt & Whitney RTX.

Demand for travel on these workhorse, medium-haul jets is increasing everywhere except China, Safran said, adding that demand related to wide-body jets was growing more slowly.

Delayed deliveries of Boeing's 787 squeezed Safran's wiring and landing gear activities, though Boeing said on Wednesday it was close to ending a year-old drought in 787 deliveries.

Safran's loss-making aircraft seats business is also suffering from supply chain gaps and cost overruns, while a recovery in other cabin equipment is on track, it said.

Safran's engine partner GE on Tuesday posted higher quarterly profit as aviation's partial recovery buoyed its jet engine business, but the Boston-based conglomerate said it too was having to deal with supply-chain issues.

($1 = 0.9800 euros)

(Reporting by Tim Hepher
Editing by Sudip Kar-Gupta)

((tim.hepher@thomsonreuters.com; +33 1 49 49 54 52; Reuters Messaging: tim.hepher.thomsonreuters@reuters.))