PARIS (Reuters) -French jet engine maker Safran raised its profit forecast for the year even as supply bottlenecks forced it to lower its revenue predictions on Friday, buoyed by demand for profitable services on planes that are already flying.
Disruption in industrial supply chains and an ongoing strike at Boeing have worsened a shortage of new aircraft for airlines, which are flying older planes for longer, meaning the repair shops where engine makers make most of their money are busy.
Safran predicted a 2024 recurring operating income of around 4.1 billion euros ($4.44 billion), up from a previous target close to 4.0 billion euros, citing a strong aftermarket so far this year.
The French company, which co-produces LEAP engines with GE Aerospace through their CFM joint venture, said nine-month revenues grew 17.4% to 19.686 billion euros led by Equipment and Defence activities and Aircraft Interiors.
Deliveries of LEAP jet engines improved in the third-quarter but remained hampered by the limited availability of high-pressure turbine blades, even though their production has been rising.
Safran joined its U.S. partner in predicting 10% fewer LEAP deliveries in 2024, compared with a previous target of flat to 5% growth, and revised down its full-year revenue target to 27.1 billion euros from 27.4 billion.
Chief Executive Olivier Andries said Boeing was continuing to take and pay for deliveries of LEAP engines “for the moment” as a strike by machinists enters its sixth week. The strike is, however, affecting Safran’s cabling business, which supplies the Boeing 737 MAX, he said.
Andries declined to comment on deliveries of aircraft at Airbus, which blamed delays at CFM among others for forcing it to lower its targets earlier this year.
Airbus planemaking CEO Christian Scherer said last week that LEAP engine supplies would continue to influence whether Airbus was able to meet its industrial targets.
Andries said supply chains were improving but would remain strained in 2025, and Safran would continue to purchase parts and avoid “stop-go” patterns to soften the impact on suppliers.
Jet engines are typically sold for little or no profit at the outset, or even at a loss, with manufacturers profiting from services spread over the life of the engine.
Safran’s widely-watched civil aftermarket revenues rose 26.2% in the first nine months, with the group targeting mid-20s percentage growth for the full year.
Core propulsion revenues rose 11.9% over the same period.
Andries reaffirmed plans for the interiors business to break even this year after a sharp rise in deliveries of business class seats that have also been blamed for some plane delays.
Safran said plans by the French government to implement a temporary increase in corporation tax could cost it 320 million to 340 million euros in 2024. Prime Minister Michel Barnier has announced targeted tax hikes for France’s biggest companies and wealthiest individuals to help narrow a gaping budget deficit.
($1 = 0.9243 euros)
(Reporting by Tim Hepher, editing by Tassilo Hummel and Tomasz Janowski)
